INRO studying price adjustment proposals

INRO studying price adjustment proposals

KUALA LUMPUR (Reuters): The International Natural Rubber
Organization (INRO) said on Wednesday that member countries are
studying three proposals for adjusting its intervention price
range.

INRO buffer stock manager Arch Roberts said in an interview
that the organization's governing council was expected to discuss
the proposals at its next meeting, set for April 21-24 in the
Malaysian capital.

Under the first proposal, supported largely by producers,
INRO's reference price would be raised by six percent to 227.85
Malaysian/Singapore cents per kg, and intervention levels would
be adjusted upwards accordingly.

The new "may-buy" level would be 194 cents and "must-buy"
would be at 182 cents. The "may-sell" threshold would be at 262
cents and "must-sell" at 273.

Currently, the reference price is 214.95 cents, while the
"may-buy" is at 183 cents, the "must-buy" at 172, the "may-sell"
at 247 and the "must-sell" at 258.

Roberts said some members led by the United States believed
that such a change would require an amendment to the
International Natural Rubber Agreement which would face the
difficult prospect of having to clear the U.S. Senate.

Under the second proposal, the price band around the reference
price would be narrowed by six percent. The reference price would
remain at 214.95 cents, but the intervention levels would change,
with "may-buy" at 196 cents, "must-buy" at 185, "may-sell" at 234
and "must-sell" at 245.

INRO said that under this proposal, initial call-up might be
higher but the narrower band might require the buffer stock
manager to sell stocks earlier, resulting in a reduction in the
overall funds requirement.

This proposal could be adopted by a special vote of the
council and would not require an amendment to the agreement.

Under the third proposal, a single currency, perhaps the
Singapore dollar, would replace the daily market indicator price
(DMIP) for INRO's price range, currently a hybrid of the
Malaysian ringgit and the Singapore dollar.

INRO estimates that to achieve the equivalent of a six to
seven percent increase in the reference price, the existing price
range would, for example, have to be converted to the Singapore
dollar at its exchange rate of mid-October 1997, Roberts said.

INRO must buy rubber if the five-day moving average price hits
172 Malaysian/Singapore cents a kg. INRO's average quoted price
on Wednesday was 175.04 cents per kg, putting it in the range of
between 172 and 183 cents where INRO may buy.

INRO last bought rubber in December, but Roberts said the
organization ran out of funds and did not buy as much as it would
have liked.

Indonesia, Malaysia and China have not yet paid their
contributions to a 150 million Malaysia ringgit call-up of funds
from last August, he said. "We are told those funds are
forthcoming," he said.

Three member governments -- Denmark, Greece and Sweden -- have
paid their contributions to a second call-up of 200 million
ringgit of funds which was made in December and is due on
February 9, he said.

The United States, France, Germany and the United Kingdom have
issued payment instructions for the second cash call, and Japan
was expected to pay on time, he said.