Thailand military government has sold half of the country’s 200,000 tonne rubber stockpile to a Thai rubber exporter and aims to sell the rest by the end of September, a senior government official said on Wednesday.”We have signed a contract with the exporter and the rubber should be cleared up from the state warehouses within three months,” Chanachai Plengsiriwat, head of the Rubber Estate Organisation, told Reuters. He declined to name the exporter.
The 100,000 tonnes of rubber was sold at 62.60 baht ($1.95) per kilogram, slightly above current market prices of around $1.80-$1.85 per kg, said Chanachai.The price was far below the prevailing levels in 2012-13 when the government agreed to pay growers 10 percent above market rates for their rubber, or around 100 baht per kg.
“No matter how big the losses would be, the government has no choice except selling it in order to move on with an appropriate policy in the futures to shore up prices,” said a Malaysian trader. Chanachai said the government was also in talks with three major rubber export firms to sell the remaining 100,000 tonnes of rubber stock and expected to reach a deal by end-September.
Thailand, the world’s biggest rubber producer and exporter, produced 4.2 million tonnes of rubber in 2013, of which 86 percent was exported. Global rubber prices have tumbled in recent years, with benchmark Thai smoked rubber sheet (RSS3) being offered on Wednesday at $1.80 per kg, far below a record $6.40 per kg in 2011, due to concerns about oversupply and weak demand from top consumer China.”Re-processing the (stockpile) rubber means higher cost. I am having doubt about the price the government claimed it has sold,” said another Malaysian trader.
However the sale of half the stockpile should ease pressure on prices in coming weeks when fine weather in Thailand is about to boost rubber supply. “The company that bought the rubber need to buy fresh latex from farmers to be blended in the process and that would rise demand shortly,” said a trader in Thailand’s Hat Yai rubber centre.
Thailand’s military government initially shelved a plan by the previous administration to sell the rubber stockpile after taking power in May, focusing instead on measures to increase domestic consumption to shore up prices. However, the sale plan was given the green light last month after advice that domestic consumption was unlikely to help absorb stocks, while the rubber was deteriorating in quality and attracting high storage costs. As of 0611 GMT; the benchmark Tokyo rubber futures contract for February delivery, which sets global tone, was down 0.1 yen to 200.1 yen per kg in an afternoon Asian trade.