INRO members urged to accept loss on buffer stock selling
INRO members urged to accept loss on buffer stock selling
BALI, Indonesia (Dow Jones): Members of the ASEAN Rubber Business Club urged the member governments of the International Natural Rubber Organization to accept losses the group will incur by selling its buffer stock at current market prices, a spokesman told Dow Jones Newswires late Saturday.
"The (ARBC) members' consensus is to urge the respective governments to accept liquidation at the current market price, even though they will lose money" at this level, said Tan Swee Hua, speaking on behalf of ARBC's reigning chairman after the club met Saturday.
ASEAN refers to the Association of Southeast Asian nations. ARBC members comprise the world's top three natural rubber producers of Thailand, Malaysia and Singapore.
INRO was a group comprising rubber producing-and consuming- countries mandated to mitigate wild price swings in the physical rubber market. Since its dissolution Oct. 13, 1999, it has been unable to sell off its 138,000-metric ton buffer stock.
When member governments last met July 18-20 in Kuala Lumpur, Malaysia, attempts to revise the clause that stipulated no sales below the group's "carrying and purchasing costs" were stymied by those governments who wanted to recover the money paid to buy the rubber.
INRO's average cost as of Oct. 13, 1999, was 69 cents a kilogram and is currently estimated to be 71 cents/kg.
The benchmark ribbed smoked sheet rubber 3 grade was offered at 66 cents/kg Friday, free-on-board basis.
"The three major producing-countries have no objections that some of their money might be wiped out by these losses," Tan said, adding that rubber industry participants are also keen to buy up the stock should its liquidation disrupt market prices.
Even if the stock liquidation might adversely affect the market, the impact will be "held back" as the private sector's interest, together with the Thai-Malaysian joint venture, represent a "purchasing force...great enough to prevent this buffer stock from getting into the marketplace," he said.
He was referring to the joint venture signed by the two governments to buy up INRO's rubber should its sale disrupt the market.
The ARBC members also discussed restraining from increasing their investment or expanding production as rubber prices remain depressed, Tan said, as well as how to deal with the problem of contracts that weren't honored when a "big international rubber trader" collapsed.