INRO short of money, stop buying

INRO short of money, stop buying

KUALA LUMPUR (Reuters): The International Natural Rubber
Organization (INRO) has run out of money for market operations
and stopped buying rubber to stabilize prices, a senior official
said on Friday.

"We're prevented by a lack of funds from intervening even
though the treaty says we must buy," INRO buffer stock manager
Arch Roberts told Reuters.

Upset over lower world prices, Malaysia has notified INRO it
will be quitting the organization in October, while Thailand has
promised to leave, dooming the 22-member price stabilization
mechanism to die.

Up until last month, INRO -- the last commodity price
stabilization agreement -- was able to buy rubber in the market
to keep prices from falling through a critical threshold.

But Roberts confirmed that INRO no longer had the funds to
intervene effectively.

"We should have been in the market this week. We were in a
couple weeks ago, spending consumers' money to buy producers'
rubber," he said.

INRO's five-day average price was at 169.25
Malaysian/Singapore cents on Friday, well below the 172 cent
level at which it normally must buy rubber in the market.

"Under normal operations, we would have bought a minimum
20,000 to 30,000 tons of rubber this week. We have to stop
intervening if nobody pays. We can't borrow because that is
banned by the agreement."

Long-time lows

The current rubber treaty came into force in 1997 and is set
to expire in 2001. The accord, adopted in 1995, nearly foundered
due to lack of support from consuming nations, but with prices
now at long-time lows, the producing nations are upset.

Roberts said the six rubber producing members had contributed
no money towards the 200 million Malaysian ringgit ($53 million)
cash call-up announced in December.

The 16 importing members had paid 78 percent of their required
contribution to the call-up, which was due last month.

Roberts said the rubber exporters had paid 77 percent of their
share of a 150 million ringgit call-up announced in August.
Importing nations had paid 86 percent of their share.

Roberts said that without money to intervene, INRO could
formally suspend buffer stock operations.

"But we have decided not to do that because we keep hearing
informally that more funds are forthcoming," he said, noting
funds had been received this week from an importing member.

"Unless there is official confirmation that nobody will pay,
we will just stop intervening."

If INRO were to announce the suspension of buffer stock
operations, a meeting of its decision-making council would have
to be held within 10 days. A council meeting is set for April 21-
24 in the Malaysian capital.

"Everyone is looking to April," Roberts said.

Normally, a member loses its vote in the council if it is in
arrears on payments. That provision can be waived by a special
vote of the council. But in order for such a vote to pass, it
needs two thirds approval by both importers and exporters.

The United States holds 343 of the importers' 1,000 votes,
effectively giving it the power to veto any special vote.