Top rubber producers again eye joint moves to arrest sliding prices
* Thailand, Indonesia, Malaysia meet this month to discuss price support moves
* Indonesia has urged farmers to reduce tapping frequency
* Concerns over demand from top consumer China weigh
By Lewa Pardomuan
SINGAPORE, Feb 7 (Reuters) - The world's top natural rubber producers are considering joint action to support prices, a year after a similar attempt failed, as tyre grades dip to five-year lows on worries about a slowing economy in top consumer China.
Indonesia, Thailand and Malaysia, which together account for more than 70 percent of global natural rubber output, are examining whether to curb exports, reduce tapping or buy the commodity from farmers in a co-ordinated fashion to reverse the price declines.
Representatives from the three Southeast nations are meeting this month to try and hammer out a deal. A preliminary meeting of the officials is scheduled this weekend in Singapore.
An agreement may provide a boost to rubber producing firms such as Thailand's Sri Trang Agro-Industry but could raise input costs for tyre makers such as Bridgestone Corp , which are the biggest users of rubber.
"I think only producing countries can support prices at this stage," said Gu Jiong, an analyst at Yutaka Shoji Co in Tokyo. "Whatever they plan to do, they just need to show their commitment. The mood in the market is very very bad."
The three Southeast Asian nations, which are grouped under the International Rubber Consortium (IRCo), last acted jointly in 2012-2013, agreeing to cut exports by 300,000 tonnes, or 3 percent of 2012 global output.
But rubber prices rose only temporarily before sliding again due to fears the debt crisis in Europe could derail demand. Indonesia, the world's No.2 producer, then publicly called for the pact to be discontinued, saying it was not the best solution under the circumstances.
With China's economy cooling more, the declines have accelerated. China's services sector grew at its slowest pace in almost 2-1/2 years in January after firms secured a smaller volume of new business, a private survey showed, adding to growing signs of slackening in the Chinese economy.
A combination of swelling inventory in China, rising output in Asia and heavy selling in benchmark Tokyo rubber futures, which set the tone for tyre grades, is outweighing growth in global auto sales that are forecast to rise up to 5 percent this year.
Producing nations have already begun responding. India is not a member of IRCo, but the main producing state of Kerala has started buying rubber at above-market prices from farmers after domestic prices plunged to four-year lows.
Indonesia has already urged its farmers to reduce tapping. Thailand, the No.1 producer, and Malaysia, the sixth largest, could opt for export and output cuts, said rubber industry officials in the region.
"If we don't reduce our output, global rubber price (declines) will deepen further because global rubber stock is high," Herdrajat Natawijaya, a director at Indonesia's agriculture ministry, told Reuters.
"We are cutting rubber output around 10 percent this year or around 300,000 tonnes in volume by reducing tapping frequency while waiting for better price."
Indonesia's SIR20, usually the cheapest in Southeast Asia, was sold this week at 85.00 to 85.50 U.S. cents a pound to a number of buyers, including top tyre maker Bridgestone. SIR20 last traded at these low prices in 2009.
And the most active rubber July contract on the Tokyo Commodity Exchange (TOCOM) fell to 18-month lows this week on concerns over demand from China, where inventories in warehouses monitored by the Shanghai Futures Exchange are at their highest since 2004. SNR-TOTAL-DW
The closely watched rubber stocks in bonded warehouses in Qingdao port are estimated by dealers at around 304,000 tonnes, compared to around 250,000 tonnes in October.
"We don't see an increase in demand for rubber," said a Malaysian government official, who declined to be named because he is not authorised to speak to the media.
"We are exploring the export cutback implemented in October 2012 until March 2013. This will be further discussed in a meeting in the third week of February," the official said, adding output cuts were needed in the longer term. (With reporting by Yayat Supriatna in JAKARTA, Anuradha Raghu in KUALA LUMPUR, Rajendra Jadhav in MUMBAI and Apornrath Phoonphongphiphat in BANGKOK; Editing by Muralikumar Anantharaman)
- Alabama man gets $1,000 in police settlement, his lawyers get $459,000
- New York police officer critically wounded in hatchet attack |
- Doctor with Ebola in NY hospital, nurse declared virus-free
- Exclusive: Charred tanks in Ukraine point to Russian involvement
- Putin accuses United States of damaging world order