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.