Rubber prices rise after intervention

Rubber prices rise after intervention

SINGAPORE (Bloomberg): Rubber prices rose in Tokyo yesterday
after the International Natural Rubber Organization (INRO) bought
rubber on the open market for a sixth day in a bid to stop
sliding prices.

Natural rubber prices have fallen nearly 40 percent in the
past year as industrial production, along with car and tire
sales, slowed in Asia.

INRO, a cartel of rubber producers and consumers, has bought
between 32,000 and 35,000 metric tons of natural rubber since
Aug. 10, spending as much as 100 million ringgit ($23.8 million),
traders said. INRO wouldn't confirm those purchases or say if it
was active in the market yesterday.

News of the purchases lifted prices, although investors are
generally "pessimistic that INRO has enough money" to put a brake
on the price fall, said Yasuhisa Sugimoto, a manager at
commodities trader Okato Shoji Ltd. in Singapore. Prices also
rose on a larger-than-expected purchase of rubber against the
August contract, which expired today. Trading houses took 600
tons of August rubber at the Tokyo Commodity Exchange today, he
said.

Natural rubber for January delivery, the most active contract
on the Tokyo Commodity Exchange, rose 1.9 yen, or 1.9 percent, to
102.6 yen a kilogram.

In a meeting Friday in Bangkok, Thailand's Deputy Minister for
Agriculture & Cooperatives Somchai Soonthornvat said Thailand was
pulling out of INRO because it had failed to stop the price fall,
causing hardship to the country's six million growers and added
costs for Bangkok, which subsidizes the growers.

Indonesia, Thailand and Malaysia are withdrawing all their
funds from INRO, depleting its reserves and leaving the cartel
largely ineffective, he said. The countries will set up a rival
group of producers that aims to cut output to a level 20 percent
below world demand to support prices.

Indonesia has since said it has delayed a final decision on
leaving INRO.

Indonesia will make a final appeal to INRO in October to
support prices, failing which it will pull out of the cartel. Sri
Lanka will do the same, according to Malaysia's Primary
Industries Minister Lim Keng Yaik.

INRO, the world's only remaining non-oil commodity cartel, has
a mandate to buy rubber from the open market to bolster prices
and sell from its buffer stocks when prices rise above its so-
called intervention indicator.

INRO's intervention indicator, a five-day moving average of
the Daily Market Indicator Price, stood at a 1998-low of 178.76
points on Monday, down 3.24 points from Friday. When the
indicator falls below 183 points, the cartel is allowed to buy
rubber on the open market.