IRCo to defend rubber price at 110 U.S. cents

Zakki P. Hakim, Jakarta

Three major producing countries are preparing to intervene in the market to help stabilize the sagging price of rubber, according to an official.

The Committee on Strategic Market Operations (CSMO), set up on July 26 by Thailand, Indonesia and Malaysia, will step in to ensure that rubber prices do not fall below 110 U.S. cents per kilogram.

"Should the market price touch the preference price of 110 cents, the CSMO will intervene in the market by buying and holding the commodity as a buffer stock," said Association of Indonesian Rubber Producers (Gapkindo) executive director Soeharti Honggokusumo on Friday.

Soeharti said that the committee would meet on Monday in Bangkok to discuss the details of the plan.

The three countries formed a grouping called the International Rubber Consortium Limited (IRCo) last year in a bid to push rubber prices higher. IRCo, which then set up the CSMO, has sufficient funds to undertake market operations.

According to Soeharti, the planned measure was part of the effort to avoid any reoccurrence of the traumatic event of 2001, when the rubber price crashed to a 30-year low of 45 cents. The price bounced back in late 2002 to reach 130 cents, but has been steadily declining since then to date. The price of the commodity on Friday stood at 112.5 cents, while the highest price in the last ten years was in 1995, when it stood at 155 cents.

Indonesia is the second largest natural rubber producer in the world after Thailand. Producing 1.79 million tons in 2003, Indonesia exported 91 percent of national production.