Rubber producers to buy global stocks to raise prices

Rubber producers to buy global stocks to raise prices

BANGKOK (Dow Jones): The Tripartite Rubber Corporation, or
TRC, plans to shore up rubber prices by buying global rubber
stocks, Malaysia's Minister of Primary Industries, Lim Keng Yaik
and Thailand's Deputy Minister of Agriculture and Cooperatives
said on Thursday.

As reported earlier, the TRC is a new consortium that will be
set up to manage rubber trading and stocks levels.

The governments of Malaysia, Thailand and Indonesia will
finance the purchases, which will include building buffer stocks,
they said.

The three countries generate about 80% of global rubber
production.

A task force will be set up to decide how the TRC will
function within a month. Recommendations will be submitted for
discussion at the next senior officials and ministerial meeting
to take place Sept. 3-7 in Kuala Lumpur.

The three countries also agreed Thursday to cut their rubber
output by 4% a year, starting from 2002.

Indonesia's Minister Luhut said Indonesia will fully support
the three countries' agreement to cut rubber output and set up
the TRC, even though the weakening rupiah favors Indonesia's
rubber exports.

He said such an agreement will benefit Indonesia in the future
when its currency strengthens.

"I believe our political problems will be solved very soon and
(Indonesia's) economy and exchange rate will be (stronger)...and
we want the (world) rubber price to go up then," Luhut said.

Thailand's rubber output in 2001 is expected to reach 2.4
million tons, while Indonesia's output is forecast around 1.6
million tons and Malaysia's around 600,000 tons.

Thailand's Deputy Minister of Agriculture and Cooperatives,
Natee Khliptong, said the three countries will come up with
measures to reduce production such as limiting planting areas and
planting rubber-substitute crops.

He added that the three countries will review rubber output
and make any required reductions every two years.

Natee said the three ministers discussed the need for a
minimum rubber export price at the meeting, but didn't reach an
agreement. This issue will be worked out by the TRC later, Natee
said.

President of the Thai Rubber Association, Choositti and
president of the Federation of Rubber Trade Association of
Malaysia, Wong Nam Wah, and chairman of the Rubber Association of
Indonesia Asril St. Amir, told a press conference after the
ministerial meeting that private sectors from the three countries
will give full support to the setting up of the TRC.

Private sectors also aim to form joint trading firms to reduce
number of sellers in the market, Choositti said.

The three ministers also agreed a trading consortia of private
sector participants will be set up with the government
facilitating its operations to avoid price competition.

Regarding the rubber price outlook this year, Malaysia's Lim
said he thinks prices will remain weak due to shrinking buying
demand from the tire and automobile industries in line with the
global economic slowdown.

Global rubber prices are at a 30-year low.

Thai ribbed smoked sheet 3 grade, August shipment, is
currently offered at 60-62 U.S. cents a kilogram while Standard
Indonesian rubber 20 grade and Standard Malaysian Rubber 20
grade, August shipment, are around 50 cents/kg and 53.50-54
cents/kg, respectively.

Industry participants reacted with cynicism Thursday to the
news.

Prices may be supported for only a few days if the market
needed fresh factors, said traders in Singapore and Malaysia. But
the plan will have no impact on prices in the long term, as
traders don't think it will materialize.

"It's just talk," said one trader.

Traders said with the majority of rubber smallholders and
exporters being private enterprises, it is difficult to control
output.

Output from smallholders will be particularly difficult to
manage, they said.

"This is a commodity which depends on demand and supply. If
farmers want to sell, they will sell. Who is going to stop them?"
said another trader.