Rubber Journal Asia Rubber Sector
Asian Rubber: Thriving against rubber volatility Given that rubber is a volatile commodity, the
The world’s top producer, Thailand, which presently exports 90% of its domestic output, is struggling to cope with declining prices, which have dropped for the third year to 50 baht/kg from 100 baht in 2012. The price slump is set to wipe off 36 billion baht from the local rubber industry this year, according to a rubber researcher. Thus, the country is revising its long-term and short-term rubber infrastructure to buffer the price declines (as well as address the rubber glut). A budget of 5.9 billion baht has been allocated by the National Council for Peace and Order (NCPO) to implement measures to overhaul the sector, consisting of nine policies and 12 projects over a period of ten years. The measures involve maintaining a stock to stabilise prices, improving planters’ liquidity, developing the rubber market and conducting R&D on rubber products, said Winthai Suwaree, an NCPO spokesman. For the short term of up to ten years, product prices will be buoyed by increasing market liquidity, adding value and improving quality of products and more lending to rubber operators. Suwaree said, “In the short term, more markets must be found and products traded at appropriate prices. In the long term, domestic use should be optimised and a balance between demand and supply must be maintained.” This action comes after representatives of the rubber farmers’ network submitted a letter to Prime Minister Prayuth Chan-ocha to propose measures for their survival. The six-group network suggested two emergency measures, which includes stopping the sale of the 210,000 tonnes of rubber in the government’s stockpile, saying the move would further push down prices. They also urged all agencies to think of how to process or add value to rubber such as adding latex to asphalt in road construction or building playgrounds or futsal fields. The government should also keep track of the quantity and quality of the rubber in its stock to stabilise prices. In the medium term, the farmers suggest a restructuring of the Thai rubber market so it can be used as a reference for prices for Asean and the world instead of foreign futures markets. The planters say they should take part in the making of rubber products while the government can help in terms of financing and marketing. They also want the government to approve a revolving fund worth 10 billion baht for stockpiling and 5 billion baht in credit for processing rubber. In Nakhon Si Thammarat, ten representatives of the farmers’ council of the southern province worst
Asian bloc, being the world’s largest rubber supplier is not spared from the travails of high inventories, unpredictable demand, and price swings. But is the region coping, asks Angelica Buan in this report.
Low prices due to glut situation he world’s rubber consumption of natural rubber reached 11.3 million tonnes in 2013 and the requirement is predicted to rise to 11.8 million tonnes in 2014. At the onset of the year, rubber prices were projected to hit bedrock amidst the low-production season, thus resulting in low inventories for sale especially in Asian rubber producing countries, according to the International Rubber Consortium (IRCO). A tripartite group comprising Indonesia, Malaysia and Thailand, IRCO accounts for about a third of global output. A previous strategy IRCO had implemented had seen curbing of exports by 300,000 tonnes. The cartel failed in this strategy, henceforth contributing to a pessimistic precedent to the state of rubber prices this year, which some analysts expect to hover low for some time. However, stockpiles rose at the end of the first quarter, with supply again outpacing demand. Surplus supplies of rubber have spiked further as demand from natural rubber buyers like the US and China remains languid. The latter, which accounts for almost a third of global rubber demand, is in itself steeped in a high rubber inventory. The glut, according to New York-headquartered industry information provider Platts has seen a 30% fall in prices of rubber in Asia. Meanwhile, the low-production season could only provide a sliver of relief to the glut. The UK-headquartered industry analyst The Rubber Economists reports that global stockpiles are rising, with inventories likely to reach 3.79 million tonnes by the end of 2014 and 4.33 million tonnes by 2015.
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Planters in Thailand offer price relief suggestions ffected countries in the region have sought remedies to shore up prices, or to say the least, reverse the effects of declining prices.
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