rubber rates

i don't know

i don't know

i don't know

Thailand currently operates an intervention scheme with the objective of supporting the price received by rubber smallholders. This price support scheme has apparently achieved its objective but at a very high cost, partly borne by the Government of Thailand and partly by the domestic processing industry. In particular, the present scheme to provide floor-price at levels which satisfy the farmers is likely to be very expensive to carry out in the prevailing weak market conditions. In 2001, Thailand decided to extend the price intervention scheme until the end of 2002 and with the decision to sell from the stockpile. Sales from the stockpile created greater problems for the market and rubber prices than the intervention scheme, as rubber was repeatedly sold below the prevailing market price. In the last seven month of 2001, the REO had released an estimated 130 000 tonnes of rubber, including the 50 000 tonnes negotiated and sold under a government-to-government deal with the People's Republic of China. With the recent spate of borrowing, over the past five months the rubber authority has taken 6.3bn Baht of loans in total. As a result, the REO has sufficient funds to continue the current price intervention scheme until its scheduled end in December this year. REO stands for Rubber Estate Organization, the Government agency appointed to conduct the intervention scheme. On 11 December 2001, three Ministers representing Thailand, Indonesia and Malaysia had completed its meeting of the ITRO that began back in July 2001. The meeting, which was held in Bali, Indonesia, plans to cut output and exports by 4% and 10%, respectively, beginning 1 January 2002. The aim of ITRO is to reduce rubber output by 4% starting from this year. This would mean that potentially approximately 181 000 tonnes in production and about 374 000 tonnes in exports would be withdrawn from the rubber market in 2002. This compares well to more than 900 000 tonnes of rubber purchased by the Thai government during their intervention programme (1992 - Present) and over 700 000 tonnes purchased by INRO during the three International Natural Rubber Agreements since October 1980. The reduction in output will reduce global stocks, ceteris paribus, which should have a positive effect on rubber prices. One can safely say that the actions taken by INRO and the Thai government have not lifted rubber prices permanently. History has shown that intervention is most effective at the beginning of an economic recovery, which results in the greatest increase in demand. So the question of whether rubber prices will increase in 2002 with the 4% reduction in output depends, partly, upon the outlook for global rubber demand.

The global economic slow down has obviously affected natural rubber demand greatly, resulting in lowest ever market prices in the past 30 years. Reduced demand was exacerbated by increased supply from South East Asia, most remarkably from Vietnam which in the last six years had doubled its production from 155 0 00 tonnes in 1995 to 320 0 00 tonnes in 2001. In an attempt to bring prices to a more remunerative level, three major producing countries, Thailand, Indonesia and Malaysia, covering over 70% of world production, had agreed to set up an International Tripartite Rubber Organization (ITRO) to manage sales and withhold stocks. The three countries agreed to cut exports by 10% as of 1 January 2002 in addition to cutting output by 4% in 2002 and 2003 through replanting, diversification with other crops and reduced new planting. This joint action by the major producers, has suggested that natural rubber producers consider current prolonged low prices as no more sustainable. Previously, INRO which was a collaborative effort involving producers and consumers, was considered not effective by the majority of its Producer Members and was consequently dissolved

Natural rubber, on the other hand, is also consumed as an industrial raw material. In rubber articles, the two kinds of elastomers are never distinguished by us as users. It could be natural, synthetic or blends of various rubbers in different proportions. The manufacturer of these articles are basically choosing the kinds of rubbers to be used on the grounds of technological merit and economic availability. 70% of NR and 60% of SR have been manufactured into automotive tyres. However, natural rubber is unique in the sense that it is consumed as an industrial raw material but produced as an agricultural commodity, and now over 80% being sourced from independent smallholders. Consequently, it becomes a social commodity where more than 30 million small farmers are at stake worldwide.

The current world consumption of rubber, totalling around 18 million tonnes per year, consists of 48% natural rubber (NR), 20% solid SBR, 14% latex SB, 12% polybutadiene, 5% EPDM, 2% polychloroprene, 2% nitrile and 7% other synthetics. Thus, in terms of quantity by type, NR is still the largest. Demand for elastomers, both for synthetic rubber (SR) as well as NR, is well secured and is continuously increasing at a rate of 3-4% per year, in line with improvements in living standards around the world. Synthetic rubber is purely an industrial raw material. The producing and consuming industries are in general closely related and dominated by large and global enterprises. Being a petroleum derived product and manufactured by polymerisation process in chemical plants, the management of supply against demand is relatively straightforward. To a certain extent, the prices of its basic ingredients namely the monomers are more or less influenced by the price of petroleum.