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.