Barriers to Rubber Exports May Be Dropped at Producers Meeting in BK, Thailand
Thailand, Indonesia and Malaysia, which account for 70 percent of global natural rubber output, may abandon their policy of restricting exports now that rubber prices have rebounded, dealers said on Tuesday.
The International Tripartite Corporation, which includes senior agriculture officials from the three nations, is meeting in Bangkok to discuss the next step after their last gathering in April. The meeting ends today.
I think no tough action is needed as prices have rebounded,” one dealer in Malaysia said. On the other hand, they should ease the policy to encourage buyers and sellers to run their business comfortably.”
At $1.68 a kilogram, benchmark Thai RSS3 grade is priced more than 50 percent above the seven-year low of $1.10 a kg it struck in December on the back of purchases by China, the world’s largest consumer.
Rubber prices have taken a dramatic turn since hitting a 56-year high of about $3.25 a kg last July on record oil prices, which in theory makes the price of synthetic rubber relatively more expensive than natural rubber.
But the peak was short-lived as a slowing global economy slashed demand for cars around the world, and in late 2008 Chinese buyers defaulted on shipments following a sharp drop in physical prices.
In December, Thailand, Indonesia and Malaysia agreed to remove 915,000 tons of rubber from the market in 2009 to prop up prices.
They cut 270,000 tons in the first quarter and then proposed at their last meeting in April to cut a combined 48,000 tons per month from the second quarter.
Some dealers expected the nations to cut exports by less than they had targeted earlier, while others said the trio might even lift the export cuts completely in a bid to boost rubber trade and offset declines in output.
Global natural rubber output was revised down slightly to 8.92 million tons in 2009, the Association of Natural Rubber Producing Countries said, while exports fell sharply in the first few months of this year.
We are not expecting much to come out of it,” one dealer in Singapore said. The price has rebounded now. It’s in a better shape since the last meeting when there was an excess of supply over demand.”
Whatever the decision, dealers said prices were no longer a main issue, especially since China still showed strong interest in rubber and the US dollar was also declining.
Despite the rising stocks both in absolute terms and relative to consumption, natural rubber prices may increase during 2009-2011,” consultants at The Rubber Economist said. The change in the value of the US dollar can influence both consumers and producers. In general, a weaker US dollar results in higher commodity prices and vice versa.”
A trader in Thailand’s Hat Yai rubber center said of this week’s meeting: I don’t think there will be any news that will have an impact on the market. Prices have recovered to a level where they are not an issue any more.”
China has bucked the trend in the struggling global automobile industry, posting year-on-year sales growth of 47 percent in May as government stimulus measures helped fuel a recovery in demand.