INRO short of bullets but prices still surging
INRO short of bullets but prices still surging
KUALA LUMPUR (AFP): The International Natural Rubber Organization (INRO) said it was running out of "bullets" to fight rubber's surging prices which yesterday hit limit-up in Tokyo after a sudden fall in regional markets last week.
Prices suddenly tumbled three weeks after INRO entered the market on July 8 to cool an otherwise sizzling market that saw prices rocketing to six-year highs, its first such intervention since 1989.
"We don't have much left (in the stockpile). Looks like speculators are taking prices for another run," INRO's buffer stock manager Aldo Hofmeister told AFP.
Hofmeister said prices had been pushed to unrealistic levels by speculators, mainly in the more active and volatile market in Tokyo, although the firmer market had been attributable to demand outpacing rubber supply.
China, which has been showing a voracious appetite for rubber, was still shopping for its September and October shipments, traders said.
"But we feel that INRO's sales had more or less filled the void and satisfied the crunch," he said.
Asked what would happen if the price hike became uncontrollable and INRO had exhausted its entire 220,000-ton stockpile, Hofmeister said: "We will just have to sit tight and see what happens."
Prices
In Tokyo, the current month closed limit-up yesterday, with August soaring nine yen to close at 150 yen a kilogram (2.2 pounds) from 141.00 yen on Friday, traders said.
In Kuala Lumpur, RSS I grade for September surged four sen to 319.00 a kilogram at midday from Friday's close of 315 cents. Since the beginning of the year, prices have bounced to between 330 sen and 350 sen a kilogram after languishing at about 210 for the last five years, traders said.
To smooth the rise, INRO had sold more than half its stockpile since its July 8 entry into the market, having exhausted stocks in Indonesia and China. It has very little left in Kuala Lumpur, with the bulk of remaining stocks kept in warehouses in Europe and the United States.
Under a 14-year-old pact now being renegotiated, INRO's six producers and 21 consumer member-nations have set specific limits for the buffer stock manager to buy rubber when prices decline and sell when they rise.
The manager "may buy" when INRO's daily moving indicator price (DMIP) falls to 167 Malaysian-Singapore cents a kilogram, but he "must-buy" when it hits 157 cents. He "may-sell" when it rises to 226 cents but "must-sell" at 236 cents.
INRO's five-day moving average, culled from the DMIP in the London, New York, Singapore and Kuala Lumpur markets, was Friday still hovering above the "must-sell" range at 239.74 cents, after hitting 252.63 on Aug. 1.
Amid the sizzle, Malaysian Primary Industries Minister Lim Keng Yaik on Sunday charged that dealers were in a plot with government agency representatives to exploit Malaysia's 550,000- odd rubber smallholders.
"They are taking advantage by paying way below the current value, with some offering smallholders only 250 or 260 sen a kilo," Lim said.