KUALA LUMPUR (June 21, 2010) — Malaysia has proposed creating a regional bloc—based in Kuala Lumpur and including neighbors Indonesia, Thailand and Vietnam—to stabilize global natural rubber prices (NR) and assure steady NR supplies, according to various reports.
The new scheme will be called the International Rubber Market, said Hamzah Zainudin, Malaysian deputy plantation and commodities minister, at a press conference in Kuala Lumpur.
Mr. Hamzah blamed excessive speculation on the Tokyo Commodities Exchange and elsewhere for distorting NR prices and necessitating the formation of a new market mechanism. Natural rubber prices hit an all-time low of about $1.10 per kilogram during the second half of 2008, but rebounded strongly in 2009 and now hover around the $3 mark. The price of Standard Malaysian Rubber 20 stood at about $2.88 per kilo in Kuala Lumpur June 18.
Aside from the participation of Vietnam, there was no word on how the International Rubber Market would differ from the International Rubber Consortium, which Malaysia, Indonesia and Thailand—the world's three largest natural rubber producers—founded in 2002 to control both NR production and prices. The Big Three rubber producers account for about 75 percent of the world NR market, Vietnam for approximately 9 percent.
A number of industry observers gave the proposed scheme little chance of succeeding. “You cannot control the prices, it all depends on demand and supply,” Indian Rubber Board chairman Sajen Peter told Agence France-Presse.
The plan is still in its infancy, and no details are available, noted one industry source who asked to remain anonymous. “But I'm skeptical about their ability to execute the plan across multiple regions and currencies,” the source said.