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.