Rubber prices likely to, remain firm next year

Rubber prices likely to, remain firm next year

KUALA LUMPUR (Reuter): World rubber prices, which bounced to
six-year-highs in 1994, are likely to remain firm throughout 1995
as the global economy recovers, industry officials and traders
say.

"Given the strong demand, the outlook for natural rubber is
very good, particularly from the perspective of the producers,"
James Hegarty, buffer stock manager for the International Natural
Rubber Organization (INRO) said on Thursday.

Sucharit Promdej, secretary-general of the Association of
Natural Rubber Producing Countries (ANPRC) in Kuala Lumpur
agreed.

"As it is now, prices of natural rubber are sustaining at high
levels," said Sucharit. "Apart from interference from the rains
and the shortage of rubber tappers, the approaching onset of the
wintering season at the beginning of the year may lead to tighter
supply" and higher prices, he added.

Malaysian RSS grade rubber was quoted at 386 Malaysian cents
(US$1.51) a kilogram (2.2lb) yesterday, compared with 209.50
cents ($0.82) one year ago.

Traders said a decline in production from Thailand, Indonesia
and Malaysia, the top three producers who account for 80 percent
of the world's rubber output will also boost prices.

"Prices are expected to strengthen at least until the end of
March but rubber will continue to trade in the higher range for
the whole year," said one senior dealer in Kuala Lumpur.

Output

The dealer said output is also declining as more rubber
plantation land is developed for commercial use, particularly in
Malaysia, as producers lose interest due to the low prices in
early 1994.

"Prices became remunerative only in the second half of 1994
and it will take some time for producers to increase output," the
dealer said.

World rubber prices soared in July 1994 when China entered the
market and bought the commodity in huge quantities for its
industrial use.

Although China stepped out of the market in early October,
dealers said prices continued to climb on increased demand from
the United States and Europe.

Hegarty said this was due to the rising world demand for
natural rubber, particularly by European and U.S. tire producers.

"The United States economy is still recovering and this has
boosted automotive sales which in turn stimulates the tire
industry," he told Reuters in Kuala Lumpur.

The Kuala Lumpur-based INRO, which groups 27 producing and
consuming countries, is the last of the global commodity pacts
with economic teeth but it has failed to cool sizzling rubber
prices.