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.