Mixed prospects for the Asian rubber industry were forecast early in the first quarter of the year. However, prices of natural rubber (NR) have reportedly been consistently sliding, brought about by low inventories and low production affected by monsoon rains and dry periods for latex.
Citing information from the Association of Natural Rubber Producing Countries (ANRPC), Thai NR prices plummeted by 17% or more between January and late April this year.
As far back as 2001, the three leading rubber producers – Thailand, Malaysia and Indonesia, formed a tripartite cartel, the International Tripartite Rubber Corp (ITRC) to boost prices of rubber with strategies. The three countries account for 70% of the world’s natural rubber output. In 2012, the group had started limiting exports. However, the move still failed to shore up prices.
In recent developments, Thailand, the world’s largest NR producer, contributing to a third of the global output, has been engulfed in political crisis that affected various industrial sectors including rubber. Rubber farmers demanded that NR prices be raised, even taking this protest to political level.
Short term measures have been enforced to aid NR prices and the farmers as well, such as cutting export tax during the last quarter of 2013, and offering subsidies for the farmers.
Soft demand in Asia, competition from an emerging NR producer, Vietnam, and political turmoil deepening, Thailand schemed up at selling its mounting rubber stockpiles – a move that is slammed by rubber farmers, and which analysts say could push further down prices, at the same time, is countering its previous agreement with Indonesia and Thailand to limit rubber supply to boost prices.
From October 2012 to May 2013, Thailand bought rubber worth US$680 million (about 22 billion baht)from farmers. The stockpiles have been left unsold for some time and are now accumulating, said Yukol Limlamthong, Thailand’s agriculture minister.
He said the government is selling 220,000 tonnes of NR (consisting of smoked rubber, according to reports), or more than 1.5%of global annual production.
With global rubber prices currently dabbling below US$2 , oversupply glares at traders who now anxious with the volume of the sell off from Thailand.
Nonetheless,Yukol assures that the government will only sell rubber, “if the price is right”.