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.