KL's rubber output expected to decrease

KL's rubber output expected to decrease

KUALA LUMPUR (Reuter): Malaysia's rubber output is expected to fall 3.23 percent to 1.05 million tons this year as estates convert land to other uses and growers cut crop size because of lower prices, officials said yesterday.

Production for the first six months of 1996 is estimated to have fallen 5.48 percent to 495,000 tons, a decrease from 523,694 tons in the same period of 1995, the Malaysian Rubber Research and Development Board (MRRDB) said.

Production for the full year has been forecast at 1.05 million tons, down from an earlier estimate of 1.07 million tons and 1.09 million tons produced in 1995, MRRDB research officer Chew Cheng Sim told Reuters.

"It's basically down because of the conversion of rubber estate land. Smallholders will also be cutting back on growing because of weaker prices this year," Chew said in an interview.

Area under rubber cultivation fell by one percent to 1.7 million hectares (4.3 million acres) last year, officials said. No estimates were available for this year.

Chew said the benchmark International One Ribbed Smoked Sheet (RSS1) was traded at an average of 381.75 cents (US$1.53) a kg for the first six months of this year, down 11.4 percent from the average of 430.67 cents in the same period of 1995.

Standard Malaysian Rubber 20 (SMR20), another important industry gauge, was traded at an average of 354.01 cents a kg, or 16.4 percent lower than the 423.53 cents in the corresponding period of 1995.

"We feel both the RSS1 and SMR20 should be trading at average of between 340 and 350 (cents) for the full year," said Chew.

RSS1 closed at 323 cents a kg on Tuesday for the current trading month while the SMR20 closed at 301.50.

Chew said the MRRDB's main concern this year was whether American tire makers and other consumers would be cutting back on imports due to a depressed U.S. economy.

The United States was the largest importer of Malaysian rubber last year, buying 125,000 tons.

Safic-Alcan, a major rubber dealer in Asia, said in its 1996 forecast that economic and industrial growth rates in both developed countries and Asia this year did not appear promising.

"The market structure, which has prevailed recently, leads to believe in a strong reluctance from the industry to accept new prices," J.M. Seyman, vice-president of Safid-Alcan said.

"Consumers have shown that they were flexible enough to withdraw from the market at any time if they considered the price increases as unacceptable, in order to wait for lower levels," Seyman said.

He said a sustained demand by China in order to rebuild its stocks could be offset by a weaker consumption in Europe and North America.