Big 4 cartel proposed to raise prices

Thailand has proposed an international committee be established among rubber-producing countries to help steer rubber prices and better manage their rubber shipments, its latest attempt to shore up prices.

Agriculture Minister Grisada Boonrach said Indonesia, Malaysia and Vietnam have already agreed in principle with Thailand’s proposal that rubber producers should have the power to set their own rubber prices and better manage rubber exports.

“The four nations are scheduled to meet next month in Thailand to talk about the new effort,” said Mr Grisada. “We hope this new mission will help boost rubber prices.”

He believes rubber prices can reach 60-70 baht per kilogramme if the four countries work together to set rubber prices.

On the domestic front, Mr Grisada said the government is seeking to buoy prices by raising local consumption. The ministry is keeping its policy to attract state agencies to use more concentrated latex to build roads and for athletic purposes.

Prime Minister Prayut Chan-o-cha also recently required military agencies to use rubber in their military activities in a bid to increase domestic consumption.

The Rubber Authority of Thailand reported rubber shipments may decline 6% this year because of increasing domestic demand. Production is expected to rise 8.4% to 4.8 million tonnes.

An agreement in late December between Thailand, Indonesia and Malaysia to reduce exports by 350,000 tonnes expired on March 31.

Concern is growing that more supply from the countries, which together account for 70% of global production, will hit the market just as demand is weakening and trade tensions between the US and China heat up.

Thai natural rubber prices have been falling for several years, largely because of a supply glut. The weak global economy also cut demand from the auto industry.

Rubber plantations in Cambodia, Laos, Myanmar and Vietnam (CLMV) also grew in the past decade. CLMV countries supply 5.3% of the global rubber market.

China, the world’s biggest rubber consumer, increased its imports from CLMV to feed domestic demand.

The price of benchmark export-grade Thai smoked rubber sheet Grade 3 (RSS3) has fallen 17.4% from 60.50 baht per kilogramme in 2016 to 50 baht as of yesterday.