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.