By Cheranka Mendis
Attempts by the three major rubber producing countries – Thailand, Indonesia and Malaysia – to stabilise the market price of rubber by restricting exports and raising prices will propel local the rubber industry to follow suit with similar rises.
Colombo Rubber Traders Association Chairman M.S. Rahim told the Daily FT that if the countries cut exports by a total of 300,000 tons to shore up prices, Sri Lanka will have to follow suit, increasing the prices of local rubber. However, the country will not be affected on a larger scale export wise as only 30% of the rubber produced here is available for export and the rest is consumed locally.
“Sri Lanka will have to follow, but the manufacturers will have to buy rubber at these prices because we cannot tax the producers. Lower grade rubber small holder producers stand to be benefited if the move is passed.”
Rahim noted that the question however is who would purchase rubber when the price has been increased. “Who will buy this?” he questioned. “Europe, USA and even the Chinese market will not be interested given their economic conditions. Presently China, which has been the biggest consumer of rubber, has stopped its exports, laid off staff, and is not manufacturing at the scale it previously used to. In this respect, who will buy rubber when the price is up further?”
He noted that the three countries lobbying to stabilise the market price were running behind the prices they saw in 2010 and 2011, when there was a boom in the market. “Santa Claus will not come every day. The problem is that overall the market for rubber is very poor.”
Rahim also acknowledged that similar measures had been taken in previous years in an attempt to raise prices, which did not deliver on the expectations. “This has happened before, but has not worked. Natural forces will always change it.”
Acknowledging that the lower prices in Sri Lanka are due to low prices in the world, Rahim asserted that the prevailing rain during the last two weeks had pushed prices up during last week’s auction, commanding an approximate Rs. 400 for both crepe rubber and RSS1. The week before, prices of the said rubber were in the Rs. 370 range.
“However from end July prices we saw a slowdown in demand as the Dry Rubber Content (DRC) fell due to the droughts experienced before. The prices have just started picking up.”
The industry is now all ears, awaiting the decisions to be made at the Three-Nation Rubber Products International Conference in Bandung, Indonesia, next month.
According to the Malaysian Rubber Board Chairman as reported via rubbermarketnews.net, the three major natural rubber producing countries will establish a mechanism to ensure rubber prices remain stable and competitive following a downtrend projection due to the current economic crisis faced by the euro zone countries at the conference. The meeting is also likely to be attended by China and India.
Thailand is planning to spend an additional 15 billion baht on rubber in rubber intervention. So far, around 80,000 tons of rubber have been procured from the farmers under the program.