INRO continues sell-off as demand for rubber surges
INRO continues sell-off as demand for rubber surges
KUALA LUMPUR (AFP): The International Natural Rubber Organization (INRO) yesterday stepped up its sale of rubber in three regional markets but failed to cool prices as physical supply remained tight, traders said.
"The sale by INRO's buffer stock manager, estimated to be more than the 30,000 tons he unloaded on Friday, was unexpectedly very well accepted today. That indicates a real physical shortage and strong demand," said a trader.
INRO yesterday sold leading consumer grades RSS 1 and SIR 20 to be delivered from its warehouses in Indonesia and China at Friday's prices of 107 U.S. cents and 93 U.S. cents a kilogram (2.2 pounds) respectively.
"On top of that, it was selling ex-Kuala Lumpur SMR 20 grade at 250 Malaysian sen (100 U.S. cents) today," the trader said.
INRO on Friday unloaded a substantial amount of RSS 1, RSS 3 and SIR 20, estimated at 30,000 tons, in its first sell-off in five years in a bid to smooth the price run-up triggered by an unexpectedly acute supply crunch.
But prices continued their surge, with RSS 1 for August inching up one sen in Kuala Lumpur to close yesterday at 308.00 sen a kilo from 307.00 on Friday.
INRO's five-day moving average, the indicator price that guides the buffer stock manager's market intervention operations, edged up to 232.89 Malaysian-Singapore cents -- a composite currency -- a kilo for Friday from 232.68 a day earlier, inching closer to INRO's "must-sell" trigger point of 236 Malaysian- Singapore cents.
Pressure
The market had been putting pressure on INRO to unload its 220,000-ton stockpile since last week when the indicator price surged past the "may-sell" level of 226 Malaysian-Singapore cents, a kilo.
The 1987 International Natural Rubber Agreement, that succeeded a 1979 pact, has since expired and has been extended for a year to December pending negotiations on a new accord to be held in Geneva in October.
The market last week blamed Thailand for committing more than it could deliver even as traders conservatively estimated a supply shortfall of at least 100,000 tons.
"The market appears to have discounted INRO's sell-off. We will have to wait for a while before we can see the real impact," a rubber broker said.
The Kuala Lumpur-based INRO was set up to stabilize prices within a band agreed under a pact by its six rubber exporting members and 21 importing members by buying rubber for its stockpile when prices are falling and selling stocks to check rising prices.
INRO sold the last of its previous stockpile of 360,000 tons in 1989.