Rubber producers extend expired price pact

Rubber producers extend expired price pact

KUALA LUMPUR (AFP): World rubber producers have agreed to
extend for a further year an expired price pact pending talks on
a new UN-brokered accord, even as international stockpiles dry
up, officials said yesterday.

The extension was agreed informally after a special session of
the International Natural Rubber Organization (INRO) was convened
here Monday to endorse a further sale of some 100,000 tons of
INRO stockpiled rubber, officials said.

Industry officials said Monday's special session indicated
that INRO had actually depleted its rubber stocks and was out of
ammunition to even out further sharp price increases.

"I can only say we sold another 100,000 tons over the last
three months after the special session held in August," said
James Hegarty, INRO's buffer stock manager.

An INRO special session is held for every net change of
100,000 tons in its buffer stock.

INRO, which was estimated to have 200,000 tons in its
stockpile in early 1994, administers a 14-year old International
Natural Rubber Agreement (INRA) to buy and sell rubber to
stabilize the market.

INRA 1987, which succeeded INRA 1979, had been extended for 12
months after it expired last year.

Hegarty said although INRO sales had not cooled rubber's
sizzling prices, they had largely helped satisfy the pent-up
demand.

Strong

"I expect prices to remain strong for most of 1995 given the
strong demand fueled by better economic growth in the United
States and Europe," Hegarty said.

Producers have until recently suffered depressed prices
arising from poor demand and surplus stocks.

Prices have since mid-year been rising and have surged by
almost 63 percent to an average of 352 Malaysian cents (140.8
U.S. cents) a kilogram (2.2 pounds) for the SMR 20 grade from 216
cents in January.

Producers, who had earlier objected to any further extension
of INRA, said they would agree only if it was to facilitate
negotiations on a new pact.

"We want INRA but not at any cost," asserted Malaysian Primary
Industries Minister Lim Keng Yaik, a vocal critic of INRO's
ineffectiveness.

INRO's six producer members and 20 consumer members are
scheduled to resume negotiations in Geneva on Feb. 6 to try
hammer out a new accord following inconclusive talks Oct. 3 to
Oct. 14 in Geneva.

Industry sources said producers had pressed for a five percent
rise in INRO's current reference price range -- the range that
guides the buffer stock manager in his market interventions to
stabilize rubber prices.

But consumers want the current price range to be rolled-over
into the new pact since it had worked well to defend prices.

INRO's five-day moving average had soared to above "must-sell"
level of 263.30 Malaysian/Singapore cents on Monday from 177.73
at the end of January.