Thailand seeks action with other producers to support rubber

BANGKOK: Thailand, the world’s biggest rubber producer and exporter, said it is seeking concerted action with fellow producers Indonesia and Malaysia to stabilise falling rubber prices.

Slower growth in major economies and worry about Europe’s debt crisis have hit rubber demand and led to falling prices in recent months. That has sparked sporadic protests by farmers in Thailand demanding government intervention.

Thailand hopes cooperation between the world’s top three producers could shore up prices, Thai Deputy Agriculture Nattawut Saikuar said.

“I had a discussion with the Indonesian trade minister last night. We agreed that rubber prices had fallen to an inappropriate level and we needed to do something to prevent them from falling further,” Nattawut said in an interview. “I also plan to go to Malaysia in early June to talk about this issue with the Malaysian trade minister.”

Indonesia is the world’s second biggest producer and Malaysia is the third biggest. The big three rubber producers account for about 70% of

Minister global natural rubber output.

The price of Thai unsmoked rubber sheet stood at 99 baht yesterday, falling in line with the benchmark grade smoked rubber sheet (RSS3) and Tokyo rubber futures prices, which set the global trend.

Tokyo rubber futures prices fell to a six-month low at 257.9 yen per kg, the lowest level since Nov 24 because of renewed concern over eurozone’s debt woes.

The price rebounded to 262.6 yen per kg as of 0641 GMT.

Traditionally, the three South-East Asian rubber producers choke off supply by cutting down rubber trees to prop up prices.

They have in the past worked together to support the market, most recently in December 2008 as physical rubber fell as low as US$1.10 per kg when global recession loomed.

At the time, they agreed to cut exports by a total 915,000 tonnes in 2009 to prop up prices.

In the event, the export restriction plan was never strictly enforced as the market started to rebound from mid-2009,largelybecauseofdemand from tyre companies in China and India.

Nattawut said the government would step up its existing intervention scheme and buy more rubber to push up the price of RSS3 to a target of 120 baht (US$3.76) per kg.

The price of RSS3, which hit a record high of US$6.40 per kg in February 2011, had also fallen to US$3.56 yesterday and was likely to fall further on euro debt crisis jitters.

The government approved a budget for intervening in the market to support prices in January but it has had a very limited impact. — Reuters