Producers continue with plans to cut rubber output
Producers continue with plans to cut rubber output
Dow Jones, Bangkok
Thailand, Indonesia and Malaysia - the world's top three rubber producers - have pledged to continue with their plan to cut rubber output and exports as well as set up a joint rubber consortium to buy and stock rubber, officials said Friday.
Senior rubber officials from the three countries are in Bangkok for a two-day meeting ending Friday to draft a memorandum of understanding involving the setting up of the consortium for ministers of the three countries to sign, possibly by the end of April.
"We will link the output and export cut plan with the consortium. We will go ahead with export and supply cuts while letting the consortium buy rubber whenever prices fall (below the agreed price)," said Chakarn Saengruksawong, Inspector-General at Thailand's Ministry of Agriculture and Cooperatives.
Ministers from the three rubber producing and exporting countries signed a joint declaration in December last year to cut combined rubber output by 4 percent and exports by 10 percent starting this year, sealing their cooperation in controlling stocks to help shore up physical rubber prices.
In addition, March 1, they established a $225 million joint rubber consortium to buy and stock rubber to raise prices. The Thailand-based consortium is expected to start its operations sometime this month, and the three member countries have to raise an initial capital outlay of $56.25 million.
"The output and export cuts and the consortium are different (only) in management...we are trying to link them together," said Rosediana Suharto, a senior official from Indonesia's Ministry of Industry and Trade.
The consortium may be ready to function sometime after the MOU is signed, said Jirakorn Kosaisawee, director of the Economics Division at Thailand's Rubber Research Institute
However, officials are unable to confirm exactly when the MOU will be signed, with Indonesia's Suharto saying she has to submit the draft of the MOU to Indonesian Trade and Industry Minister Rini Soewandi for final approval.
In addition, the cash-strapped Indonesian government hasn't decided yet where it will obtain funds from to contribute to the consortium, according to Suharto.
The capital of the consortium will be held by the three countries in proportion to their market share. Since the consortium needs an initial outlay of $56.25 million, Thailand, as the biggest rubber exporter, will have to contribute $25 million; Indonesia, the second biggest rubber exporter, will contribute $18.75 million; and Malaysia will give $12.5 million.
Suharto noted that Trade and Industry Minister Soewandi said earlier that "maybe" Indonesia's private sector will have to provide the funding to the consortium. However, Soewandi will discuss the issue with the private sector and decide later who is going to take responsibility for the funding, Suharto said.
A delegate from the Rubber Association of Indonesia said talk between the association and several banks to seek loans for funding the consortium is still going on.
"There is no conclusion (on the loan issue) yet, however," he said.
Thailand, Indonesia and Malaysia expect that the consortium, along with the export and output cut plan, will help shore up prices of physical rubber, which are now at historical lows, trading around 66-68 U.S. cents a kilogram Friday.
Rubber output from Thailand, Indonesia and Malaysia represents 80 percent-85 percent of world production.