Mon, 21 Jun 2010

From: AFP

Kuala Lumpur. Malaysia on Friday proposed setting up a regional bloc with Indonesia and Thailand to control global rubber prices and keep production steady as the cost of the commodity rises.

Hamzah Zainudin, deputy plantation and commodities minister, said the International Rubber Market, which would be based in Kuala Lumpur, would bring together the three top producers and Vietnam.

“At the moment we don’t have a formal relationship, but an understanding that we will meet at least twice a year, as we are already doing at the moment with Thailand and Indonesia,” he told reporters.

“We don’t want to say it is a cartel but what we want to see that the price is stable and good for everybody. When we see the price going down, we will hold back the supply of rubber.”

Hamzah said he was confident demand would remain high. “I’m very bullish and we are trying to maintain a stable price of 8 to 9 ringgit [$2 to $3] a kilo,” he said, with a target price of $3 a kilo for the next five years.

Natural rubber prices plunged 66 percent to $1.10 per kilo between July and December 2008 as the global downturn hammered demand. However, it soared to $2.87 a kilo in December 2009, and was trading at $2.91 on Friday.

More than 93 percent of Malaysia’s natural rubber comes from its 265,000 smallholders, who tap less if prices are low and more if prices are high.

“With this kind of a mechanism, we can keep the prices high enough to keep the smallholders tapping. Industry will also stay happy as they have a guaranteed supply of rubber,” said Salmiah Ahmad, director general of the Malyasian Rubber Board.

Malaysia, Indonesia, Thailand and Vietnam produce 76 percent of the world’s natural rubber and account for 93 percent of global exports.

However, Indian Rubber Board chairman Sajen Peter said there was no need for the new market.

“You cannot control the prices, it all depends on supply and demand and so long as a mismatch between supply and demand exists, prices are going remain at a rate comfortable at least for the coming few years,” he said.