'Big 3' to manage NR exports, limit planting

KUALA LUMPUR, Malaysia (Nov. 20, 2014) — The three major natural-rubber producers Malaysia, Thailand and Indonesia have agreed to “manage” natural rubber exports in a bid to address the NR price fall and to stop expanding NR planted areas until 2020 to ensure a “healthy balance” of supply and demand in the global market.

Representatives of the three nations disclosed their plans to strengthen declining rubber prices today at a ministerial committee of the International Tripartite Rubber Council (ITRC) in Kuala Lumpur.

The three states agreed to “manage” the natural rubber exports to global markets “to ensure there is no excess supply…that will contribute toward destabilizing price. In this context, the three countries to regularly update ITRC on export statistics for purposes of monitoring and future direction.”

In a bid to improve demand, the three countries also came up with a list of focus areas to increase local consumption of natural rubber, including use of rubber in roads and dam construction as well as promoting the use of high-quality rubber gloves and latex beddings in government hospitals and clinics.

In this context, countries operating under “Trade Integration Mechanism” policies agreed to enhance domestic consumption NR of up to 10 percent annually, the ITRC said.

The ministers also noted the progress of work toward establishing a Regional Rubber Market, a proposal that would provide a platform for better price discovery and effective hedging functions designed to bring benefits to producers, consumers and market players.

In this context, the ministers agreed that the three countries undertake follow-up measures recommended in the report and work toward realizing the Regional Rubber Market within 18 months

On the topic of planting, the ministers agreed that ITRC countries will ensure that the allowable planted area under the Supply Management Scheme (SMS) for the period 2015 – 2020 for the TIM countries do not exceed the target set. These include not expanding new planted area.

“This is to ensure healthy balance of NR supply and demand in the global rubber markets,” said a press release by the council.

Also discussed at the meeting were the latest developments in rubber market, supply fundamentals, current stock levels and the recent price trend.

Malaysia, Indonesia and Thailand account for two-thirds of global NR production and 79 percent of global NR net export, the ITRC said. Rubber planting in these three countries is dominated by rural smallholders, with an estimated 4.6 million rubber smallholders in these three countries.

The ministers also agreed to forge strategic alliance ties with other rubber-producing countries in the Association of South East Asian Nations, namely Cambodia, Laos, Myanmar and Vietnam, to discuss joint effort and cooperation on measures to strengthen NR prices for mutual benefits.

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Shahrzad Pourriahi is a reporter for European Rubber Journal, a U.K.-based sister publication of Tire Business