INRO raises reference price by five percent

INRO raises reference price by five percent

KUALA LUMPUR (AFP): The International Natural Rubber Organization (INRO) Tuesday raised its buffer stock reference price by five percent to 206. 68 Malaysian/Singapore cents a kilogram (2.2 pounds) at a special session here.

"The upward revision should bode well for the market and be an encouragement to producers," INRO buffer stock manager James Hegarty told reporters after the half-day meeting.

"It does increase the level at which the buffer stock can be utilized in the market place," Hegarty said.

Tuesday's revision will enable the buffer stock manager to enter the market earlier to buy rubber and prop up declining prices as the intervention levels, which are pegged to the reference price, will be raised by 15 percent and 20 percent respectively.

The "may-buy" price will be raised to 176 Malaysian/Singapore cents from 165, while the "may-sell" price will be 238 cents and the "must-sell" 248 cents.

The reference price is reviewed every 15 months and will be raised automatically by five percent if the INRO daily market indicator price (DMIP) is above its upper intervention price in the six months before the revision.

The revision had been based on the six-month DMIP average at August 2 of 318.74 cents a kilogram. The DMIP is now at 235.82.

The reference price was fixed at 196.84 cents a kilogram during the last revision in February 1993 after it was reduced by five percent, Hegarty said.

Traders, reacting to the revision, said it will have little impact on the market as the price would reflect the actual market situation.

"Rubber prices have been low for a long time, and although the current market is weak, it will pick up in the long term. Prices are not going to go back to the lows of olden days," said Furui Chiaki, of Singapore-based brokerage Yutaka Shoji.

The fundamentals have improved, and although production is rising, consumption is catching up fast, Chiaki said.

Rubber prices, which had reached six-year highs last year, have moderated since February on rising production and speculative activities, brokers said.

"We should not only look at the US, Japan or Europe. We should watch consumption in the booming Asian region," he said.

INRO groups six producer and 21 consuming countries. Among its members are producer countries Malaysia, Indonesia, Thailand, and consumers the United States, Japan and the European Union.

Hegarty said the special session also endorsed the appointment of British national James Telfer Inglis, 55, as its deputy executive director.

Inglis, who has worked with Uniroyal Europe and Dunlop and has vast experience in the rubber and tire industry, replaces Jurgen Knote who retired in December.