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.