KL, Bangkok to bid for INRO's buffer stock

KL, Bangkok to bid for INRO's buffer stock

KUALA LUMPUR (AFP): Malaysia and Thailand -- which have set up a fund to stabilize rubber prices -- will bid on the open market for buffer stock held by the International Natural Rubber Organization (INRO), a Malaysian minister said on Saturday.

Primary Industries Minister Lim Keng Yaik said purchases would be conducted in the "normal way" and they would not negotiate with INRO, which is to sell off its stock before winding up.

"We do not expect them to negotiate with us. We will bid in the open and it will be transparent," he told AFP.

Lim said this month that Malaysia and Thailand, among the world's top rubber producers, would set up a US$43 million fund to buy up the buffer stock and stabilize prices.

Lim said the goal was to sustain prices and if prices were maintained the fund would not make any bid.

"We are going to do the bid through commercial agencies," he said Saturday. "They are given the task of not allowing the overhang in INRO supplies to have a bearish impact on prices."

Lim said the approach was designed to prevent multinational tire manufacturers from influencing prices.

INRO has a 140,000-ton stockpile and aims to sell 34,000 tons per quarter from January 2000, market conditions permitting. Sales must be completed by June 30 next year.

Buffer stock manager Arch Roberts said Friday that INRO might start selling its stock soon if prices continue to rise.

He said Thailand and Malaysia were free to bid along with anyone else but INRO would not negotiate directly with them.

Responding to the remarks, Lim said they only strengthened his "belief that he (Roberts) cares more for consuming countries than supplying nations."

The fate of INRO, the 19-year-old organization linking producers and consumers, was sealed in September after Thailand -- the world's largest producer -- and Malaysia -- third largest after Indonesia -- decided to pull out.

They said the organization had failed to raise prices.

Lim said Malaysia decided to leave INRO because it was "pro- consumer and therefore detrimental to producing countries."

Describing the strategy of the joint fund, he said Malaysia and Thailand would compete with other bidders to prevent any suppression of prices.

Industry sources say the pact has already produced results, with rubber prices rising even before the two producers made any bids.

"It is a psychological bid. Already, the price is going up," said one official who requested not to be named.

Malaysia's tire-grade SMR20 is currently trading at about 74 US cents a kilogram. Roberts was quoted as saying that INRO would sell if prices go to 75.

Lim declined to say what price level would please the two producers.