Malaysia rubber production falls 12%

Malaysia rubber production falls 12%

KUALA LUMPUR (Reuter): Weak prices have driven down Malaysian natural rubber output by an estimated 12 percent in the first quarter of 1997 compared to the year-earlier period, rubber traders said yesterday.

Production between January and March 1997 is estimated at 257,000-260,000 tons, compared to 291,723 tons in the same period of 1996, the traders told Reuters.

"The current prices which consumers are paying rubber producers are just not enough to encourage production," said a dealer with a foreign rubber broking house in Kuala Lumpur.

Malaysia is the world's third-largest rubber producer.

But its rubber market has been sluggish for more than six months due to tiremakers and other rubber consumers seeking lower prices. Traders said competition from cheaper Indonesian rubber was also eating into Malaysia's rubber sales.

The price of Standard Malaysian Rubber is down by around six percent in the last six months to an average 315 Malaysian/Singapore cents a kilogram. The price is a weighted average of Singapore and Malaysian currencies.

The traders said lower prices will make it difficult for rubber factories and growers to sustain their business.

Traders said smallholders, who own about 60 percent of Malaysian rubber fields, were expected to produce about 160,000- 161,000 tons of rubber in the first quarter of 1997.

Privately run plantations were expected to contribute 56,000 to 57,000 tons while estates governed by the state's Federal Land & Development Authority (FELDA) were forecast to provide between 41,000 and 42,000 tons, the traders said.

They also estimated the export of rubber would fall around four percent to 230,000 tons during the first quarter of this year against the 239,300 tons shipped out in the corresponding period of 1996.

Europe is expected to be the largest consumer of Malaysian rubber -- buying 58,000-59,000 tons -- followed by Korea, the United States and China.

Traders said one positive trend was the growing local consumption of latex, which jumped 89 percent.

Most of the 118,500 tons of dried latex sold to the domestic market was for the manufacture of gloves, rubber linings for cars and garments, and condoms, said traders.

The lower rubber output is also expected to lead to higher imports of rubber from countries such as Thailand, the Philippines, Liberia, Myanmar, Vietnam and Cambodia, traders said.

They estimated the import of rubber to rise about 7 percent to 75,000 tons in the first quarter of this year, from the 70,029 imported during the same period of 1996.

Malaysia's Primary Industries Minister Lim Keng Yaik said last week that natural rubber prices have been suppressed for too long and urged major tire manufacturers and other users to support reasonable prices.

"If there is no fair remunerative price for rubber, then producers will be forced to cut back on production and rubber prices will spiral like nobody's business," Lim warned.