Thailand, Malaysia ready to quit INRO over prices
Thailand, Malaysia ready to quit INRO over prices
KUALA LUMPUR (Reuters): Thailand and Malaysia may realize their long frustrated goal of higher rubber prices by quitting the very organization which once embodied their hopes, dealers said yesterday.
Malaysian Primary Industries Minister Lim Keng Yaik said on Friday the cabinet had approved the country's withdrawal from the International Natural Rubber Organization (INRO).
He said Malaysia's decision would be officially announced in Bangkok at a meeting of the Association of Natural Rubber Producing Countries (ANRPC) on Aug. 20-21.
Lim said Malaysia would present a new price stabilization mechanism along with alternative strategies for higher rubber prices.
Thai Deputy Agriculture Minister Somchai Sunthornwat told Reuters last week his country might also quit INRO but has not said when.
Both producers have long pinned their hopes on INRO for preventing price declines.
But now they have turned on the world's only surviving commodity pact, saying it is unable to support prices.
"Supply of rubber is now tremendous and INRO has done nothing to reduce it despite this being one its primary objectives," said David Kay, a rubber dealer with Kuala Lumpur-based K.L. Trading.
"I think if Malaysia and Thailand withdraw now, they may actually speed up the end of INRO, and without such a mechanism in place, producers may arbitrarily raise prices which have been depressed for so long," he said.
INRO has a buffer stock mechanism to buy and sell rubber in the market. But the level at which it is authorized to intervene to buy rubber has been too low to boost prices during Asia's year-long financial crisis.
Traders could not pin down a reason for this.
"Does it have something to do with funding or what? We never know," said a trader in Jakarta.
"But based on our past experience, even if INRO enters the market, prices will only rise temporarily. In addition, INRO can only buy a limited amount of rubber," the trader said.
Dealers were still skeptical on Monday that Thailand, the world's largest rubber producer, and Malaysia, the third largest, would risk ending a price mechanism both have struggled to preserve.