INRO unsighted in market, weighing situation

INRO unsighted in market, weighing situation

KUALA LUMPUR (AFP): The International Natural Rubber
Organization (INRO) was yesterday closely assessing rubber's
surging prices amid speculation that the uptrend was artificially
created by overselling in Thailand.

INRO was still unsighted in the market Friday although dealers
had widely expected the buffer stock manager to exercise his
discretionary right and begin his first sell-off in five years
from his 220,000 ton stockpile to arrest the price surge, dealers
said.

"INRO does not want to create a situation where by selling,
prices start to decline at a time when it wants to stabilize
prices. That may kill the market," said an INRO source.

INRO, which groups six natural rubber producers and 20
consuming nations, operates a buffer stock to stabilize prices
within an agreed band.

Under the INRO-administered International Natural Rubber
Agreement (INRA), the buffer stock manager may sell rubber when
INRO's five-day moving average, which serves as a daily indicator
prices, touches the "may-sell" level of 226 Malaysian/Singapore
cents, a composite currency.

But he must dispose of rubber from the stockpile when the
price reaches the "must-sell" trigger of 236 Malaysian/Singapore
cents. The five-day moving average rose to 227.31 Thursday from
225.13 Wednesday.

It was at 179.49 Malaysian-Singapore cents at the end of
January.

Overselling

"INRO is cautiously assessing the market to determine its
actual strength," the source said, adding that buyers had blamed
overselling by the Thai government for the price hike.

"The Thai government is unable to deliver what it had sold and
that has created an impression of a huge shortage. INRO is
checking to ascertain the extent of the shortage," said the
source.

In Bangkok, an official of the Thai Rubber Research Institute
acknowledged that Thailand committed to sell more than 100,000
tons of rubber to China, 90,000 tons of which remained to be
shipped.

"Thailand may have to buy from other markets to meet the
commitment," the official said, while conjecturing that this
could have stimulated the price increase.

INRO sold the last of its previous stockpile of 360,000 tons
in 1989 after the spread of acquired immune deficiency syndrome
(AIDS) triggered a rush for condoms and latex gloves, sending
rubber prices to the highest levels since the Korean War in the
1950s.

An American rubber buyer in Singapore said he was hoping INRO
would come in soon to smooth the rise.
"As a buyer, we would, of course, want to buy at more reasonable
rates," he said.