Malaysia starts rubber pact, urges fair prices

Malaysia starts rubber pact, urges fair prices

KUALA LUMPUR (Reuter): Malaysia, the world's third largest
rubber producer, launched a global rubber price pact yesterday
and urged consumers, especially the world's five big tire makers,
to support prices.

"If there is no fair and remunerative price for rubber, then
producers will be forced to cut back on production and rubber
prices will spiral like nobody's business," Malaysian Primary
Industries Minister Lim Keng Yaik told reporters.

Speaking at the launch of the International Natural Rubber
Agreement 3 (INRA 3), Lim said tire makers such as Goodyear Tire
& Rubber Co, Michelin, Bridgestone Corp, Continental and
Firestone were mainly responsible for poor prices now.

Asian rubber markets have been sluggish for six months due to
weak demand from tire makers and other users who were constantly
seeking lower prices, regional traders said.

Lim said tire manufacturers always managed to raise the price
of their products, despite stiff competition, while rubber
growers have been faring less well.

In Thailand, the world's largest rubber producer, standard
rubber cost an average $1.20 a kg, around the same as in
Malaysia, traders said.

Lim declined to say what he considered a reasonable price,
saying this was "up to market forces".

He also dismissed the possibility of Malaysia teaming up with
Thailand and Indonesia to form a rubber cartel.

Lim said Malaysia, for instance, was only producing about a
million tons of rubber a year when it had the capacity to turn
out 1.3 million tons.

He said the new world rubber price pact was also designed to
be more sensitive to market changes.

The INRA 3 is the world's only remaining global commodity
agreement with a buffer stock that allows the industry to buy and
sell rubber to stabilize prices.

Two cycles of the agreement -- INRA 1 and INRA 2 -- have been
completed under the administration of the International Natural
Rubber Organization (INRO).

The third cycle effectively begins on Tuesday, with a week-
long meeting that will name Malaysia's Ahmad Zubeir Noordin as
the new executive director of INRO.

The U.N.-brokered agreement is valid for four years and the
lower indicator price for the buffer stock manager to intervene
has been raised to 157 Malaysian/Singaporean cents per kg, based
on the currency of the two countries, from 150 cents previously.