Thailand, Indonesia, Malaysia quit INRO
Thailand, Indonesia, Malaysia quit INRO
SINGAPORE (Bloomberg): The world's top three rubber producers -- Thailand, Indonesia and Malaysia -- said they will pull out of the International Natural Rubber Organization and set up a rival group that aims to cut production 20 percent below world demand.
The three countries, accounting for 80 percent of world rubber production, are angered by a lack of action by the rubber group, known as INRO, to stem a 30 percent slide in rubber prices in the last year. The countries said they will withdraw all their funds from INRO, depleting its intervention reserves and leaving the rubber cartel largely ineffective.
"The withdrawal of the three countries will put into question the existence of INRO," said Gerard Loyen, INRO's deputy executive director in Kuala Lumpur. He said withdrawal by any member is effective after one year, although the INRO council has the option to dissolve the cartel before that.
Rubber prices have fallen as industrial production in Asia slumped along with economies across the region, pulling down demand for cars and tire sales
Loyen said with supplies still outstripping demand, prices "may continue to slip" should INRO be liquidated.
Market Buys
While producer members of INRO complain about the lack of intervention in the market by the cartel earlier this year, it did buy rubber on the market in the past two weeks. Those purchases, though, did little to support prices.
INRO bought around 30,000 metric tons of natural rubber last week, spending as much as 100 million ringgit ($23.8 million), traders said. INRO wouldn't confirm those purchases.
No matter how much they are buying, "there is still too much rubber in the market," said Singapore-based Kang Liat Bin, marketing manager with Sahabat Co., a subsidiary of privately held PT Kirana Megatara, one of Indonesia's largest rubber producers.
As rubber prices fell in the past year, consumer members of INRO benefited, adding to the anger among producer countries.
"INRO isn't receptive to our needs and is incapable of rendering immediate assistance in price adjustment," Thailand's Deputy Agriculture Minister Somchai Soonthornvat said.
He added that "some concrete action" will be seen within a month on setting up a new rubber group.
Soonthornvat said the decline in rubber prices has caused hardship to Thailand's six million growers, at a time when the country is suffering from an economic crisis.
The withdrawal of funds from INRO by the three countries amounts to 200 million baht ($4.9 million) for Thailand and 29 million ringgit ($6.9 million) for Malaysia. The figure for Indonesia wasn't immediately available.
As for the new group they plan to set up, it will include the three largest producers and Singapore, said Malaysia's Primary Industries Minister Lim Keng Yaik.
Other possible members include producer members of the Association of Natural Rubber Producing Countries (ANRPC), he said. The ANRPC met today in Bangkok.
The ANRPC is an intergovernmental group that promotes producers' interest and runs development programs for small farmers. Its members are Thailand, Indonesia, Malaysia, Singapore, Vietnam, Sri Lanka, India and Papua New Guinea.
Singapore is the only member that doesn't produce natural rubber.
INRO includes 18 importing and six exporting countries. It manages the third United Nations-backed International Natural Rubber Agreement, which came into force in February 1997. This agreement to stabilize world natural rubber prices extends through 2001.
Ribbed Smoked Sheet 3 rubber for October delivery on the Singapore Commodity Exchange rose 1.6 percent to 64 cents a kilogram.