New Malaysia rubber plan will not boost prices: Traders
New Malaysia rubber plan will not boost prices: Traders
KUALA LUMPUR (Reuters): Malaysia said on Friday it plans to support local rubber prices by buying up to half of domestic output and will consider banning imports temporarily -- moves that traders said would not halt sliding prices for long.
They said although the plan would boost prices in the short- term, international prices would prevail in the long term because other countries were still exporting rubber.
Primary Industries Minister Lim Keng Yaik said the government could require $1 billion to buy 450,000 tons of rubber from the local market, half of the nation's total output.
Malaysia might also impose a temporary ban of rubber imports of about 550,000 tons, the national Bernama news agency quoted him as telling reporters.
"We will withhold the rubber from the export market and instead convince downstream processors to utilize more locally produced rubber," he said.
Malaysia is the world's third largest producer of rubber, after Indonesia and Thailand.
"The country will lose its earnings from rubber. And I don't think this can work unless all producers decided to group together to stop exports to boost prices," said a plantations manager.
"But it is difficult if Malaysia gives quotas to each estate and factory but foreign producers like Thailand, Indonesia, Nigeria, Sri Lanka and Vietnam are still exporting," he said.
Said a trader in a dealing firm: "By imposing the ban, Thailand and other producers would not be able to sell to Malaysia and this will cause excess of supply and drag prices down."
The plan is subject to cabinet approval.
Lim said the proposed market intervention would help ease the plight of rubber smallholders. Smallholdings account for 85 percent of Malaysian production.
Malaysia served notice to withdraw from the International Natural Rubber Organization (INRO) last year, which will come into effect on Oct. 15, 1999.
On March 18, Thailand also confirmed its intention to pull out from INRO, which groups the world's rubber consumers and producers.
INRO has not purchased rubber in the market since its last intervention on Feb. 24 due to short of funds.