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.