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.