Producers and industry bodies said they were set to charge a significant premium over the exchange-traded futures contract from the second half of 2015, a move that would mark a radical change in an industry where plunging prices have hit farmers hard.
Major producer Halcyon Agri Corp Ltd, which together with Sri Tang accounts for a total of nearly a fifth of global output, is also involved, along with at least 8 other growers in Thailand and Indonesia.
“If this move is followed through with action it could change the mood and tone of the market. It would be a game changer,” said Paitoon Wongsasutthikul, analyst at broker Agrowealth in Bangkok.
Global prices have been languishing near their lowest since 2009 due to a chronic glut and weak Chinese demand.
“Prices of Sicom no longer reflect the real cost of rubber production,” a spokesman from Thailand-based Sri Trang told Reuters in an email, adding that the company would also stop delivery to the bourse.
“We have no intention of manipulating prices. All we are looking for is to get a fair and equitable price reflecting the cost of production.”
Sri Trang has an annual production capacity of 1.2 million tonnes, exceeding the entyre output of No. 3 rubber producer Vietnam.
Some Thai producers who sell to China, the biggest buyer of rubber, are looking to boost premiums to US$30-US$40 (RM108-RM144) a tonne over Sicom prices, from US$10-US$20 currently, said a source with knowledge of the matter who declined to be identified as talks were ongoing.
Other producers are planning much steeper increases, the source said.
Halcyon and some Thai producers on Wednesday met with tyremakers and officials from SICOM, owned by Singapore Exchange, to discuss the measures.
The source, who was part of the meeting, said tyremakers had stated they would not oppose price increases, but they would also consider buying from other producers.
But there was no clear agreement among producers on plans to stop delivery of their rubber to Sicom, with some exporters indicating they were willing to continue deliveries.
Halcyon will go ahead with plans to halt delivery of its cargoes to Sicom, chief executive Robert Meyer told Reuters.
“It doesn’t really make sense for anybody to deliver to Sicom when you can get a higher price selling it outside,” he said.
Physical rubber prices are already 3-4 cents per kilogram higher than Sicom prices, he added.
A spokeswoman for Sicom said it would issue a statement later on Wednesday.
Producers will negotiate directly with end-consumers such as tyremakers instead of going through intermediary dealers, Meyer said.
Other Thai growers Southland Rubber, Thai Hua Rubber and Sri Trang affiliates Rubberland Products and Num Hua, have informed the Thai Rubber Association they were taking the same steps, the group said in a statement to Reuters.
The Indonesian Rubber Association (GAPKINDO) has also thrown its support behind the measures, said chairman Daud Husni Bastari.
The move follows other attempts by Asian producing countries to shore up prices in recent years such as curbing exports or subsidising farmers.
But major buyers such as Bridgestone Corp and Goodyear Tyre and Rubber Co have the flexibility to secure their raw material supply from wherever they see fit.
“It’s the same case as any previous long-term negotiations that we’ve had, there’ll always be those having higher premiums than others and it’s up to us who we choose to partner with,” said an official at a company who buys rubber for a global tyremaker. – Reuters