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.