New price lows seen for rubber on INRO sale

New price lows seen for rubber on INRO sale

KUALA LUMPUR (Reuters): The International Natural Rubber
Organization's (INRO) decision to sell its entire stockpile in
eight months may push rubber prices to fresh lows from last
year's 30-year bottom, traders said on Sunday.

Twelve months after winding up, INRO, the world's last
commodity price pact which tried unsuccessfully to satisfy both
consumers and producers, said last week it would clear its stocks
at "prevailing market prices" by June, 2001.

This meant an additional 138,000 tons would come on offer in
the market any time over the next eight months and allow buyers
to quote even lower than now, traders said.

"It'll hamper the market, I can tell you that," said a dealer
in Malaysia's capital, the world's third largest rubber producing
center and trading center and where INRO met last week.

"Even the 50,000 plus tons traded on the Japanese market can
pull the markets down in Southeast Asia," said the dealer. "Here,
you're talking about more than 100,000 tons."

Although amounting to no more than two percent of annual world
supply, or about a week's consumption, INRO's stockpile has been
a drag on rubber prices.

Prices tumbled to 23 U.S. cents per lb last year, the lowest
in 30 years, and have recovered little. On Friday, sellers quoted
Malaysia's tire-grade SMR20 at around 28 U.S. cents a lb.

INRO disbanded last October after Thailand, the world's
largest rubber producer, pulled out of the pact along with
Malaysia. The two countries said INRO was not doing enough to
help support prices, a charge the organization denied.

INRO initially hoped to sell its stocks at around 71 U.S.
cents a kg -- its purchase and carrying costs. But at the end of
its council meeting on Friday, it settled for market prices.

It gave chief executive Arch Roberts, in charge of the sale,
flexibility in selling six months forward besides spot to get a
better deal.

But dealers doubted this would help much.

They said logically, demand for natural rubber should have
risen as synthetic rubber would become more expensive in coming
months, thanks to the soaring price of crude oil.

"But this is not what we're seeing," said one. "Forward or
spot, a bearish market is bearish. Consumers are sitting on
enough stocks, so it's their call."

INRO also said member governments could bid for its stockpile
unlike in the past when only market players could. Thailand
immediately hailed the news, saying it would not mind buying
below the market.

"Now that's one producer talking," said a trader. "If the same
people who accused INRO of stifling prices are trying to buy its
stocks cheap, then it doesn't speak much for sentiment."