INRO efforts fail to lift rubber prices

INRO efforts fail to lift rubber prices

SINGAPORE (Bloomberg): The International Natural Rubber Organization, a cartel comprising producers and consumers, was buying rubber yesterday on the open market for a third day, yet failing to lift prices.

Rubber for January delivery on the Tokyo Commodity Exchange fell 1.1 yen, or 1 percent, to 103.1 yen a kilogram. Natural rubber prices have slumped 30 percent in the past year as industrial production and car sales in Asia slow.

The cartel, known as INRO, on Tuesday bought an estimated 7,000 metric tons of block and sheet rubber from producers in Malaysia and Thailand, and dealers in London and New York. It bought an estimated 13,000 tons of rubber on Monday.

``If the market continues to be weak, we will continue to intervene,'' said Gerard Loyen, INRO's deputy executive director in Kuala Lumpur. He refused to comment on if the cartel had called on members to contribute additional funds to finance its purchases.

Traders said INRO on Tuesday bought Thai Ribbed Smoked Sheet 1 at 64.50 U.S. cents a kilogram, Standard Thai Rubber 20 at 58.25 cents and Standard Malaysian Rubber 20 at 57.50 cents. INRO would not confirm those purchases.

INRO has between 90 million and 100 million ringgit (US$23.5 million) to finance its rubber purchases and can call on member countries to contribute additional funds once it's in the market, said Ng Kok Tee, INRO's buffer stocks officer.

Yet with INRO members Malaysia, Indonesia and Thailand threatening to leave, the cartel could be left with insufficient funds.

Malaysia said at the end of July it was pulling out of INRO, and is lobbying producers such as Thailand, Indonesia, Vietnam, Papua New Guinea, India and Sri Lanka to do the same and form a producers' cartel instead.

The top three producers, Thailand, Indonesia and Malaysia, account for 80 percent of global natural rubber production. Payments to INRO are based on the size of a country's output and for consumers, on the quantity of imports.

INRO has the mandate to buy rubber from the open market to bolster prices and sell from its buffer stocks when prices rise.

INRO's intervention indicator, a five-day moving average of the Daily Market Indicator Price, is now at an eight-month low of 181.35 points, 1.65 points below the level that allows the cartel to buy rubber on the open market.

INRO includes 18 importing and six exporting countries. It manages the third United Nations-backed International Natural Rubber Agreement, which came into force in February 1997. This agreement to stabilize world natural rubber prices extends through 2001.