Regional rubber mart to be set up in 18 months

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KUALA LUMPUR: Malaysia, Thailand and Indonesia, which together form the International Tripartite Rubber Council (ITRC), have set an 18-month target to establish a regional rubber market to strengthen rubber prices, said Plantation Industries and Commodities Minister Datuk Douglas Uggah Embas.

Speaking to reporters after chairing the high-level ITRC ministerial committee yesterday, Uggah said the regional rubber market will serve as a platform for better price discovery and effective hedging functions that will bring benefits to producers, consumers and market players.

“The progress towards the establishment of a regional rubber market is on its way. At the moment, I am unable to disclose the full mechanism of how it will work, as a full report towards this goal will only be released by year end. So we have to wait and see,” he said.

Malaysia currently has its own Malaysian Rubber Exchange, a unit under the Malaysian Rubber Board (MRB). However, the so-called exchange does not provide actual trading, it only publishes the spot price given by its price advisory panel consisting of rubber companies.

The three countries currently account for 67% of global natural rubber production and 79% of the global natural rubber exports.

Uggah said the three countries have also agreed not to expand new rubber planting areas beyond targets set earlier to avoid “destabilising rubber prices” and to boost domestic rubber consumption by 10% per year.

“We can increase consumption through the application of natural rubber in [the] construction and healthcare sectors. For example, we can use natural rubber in road and dam construction, and also explore potential usage in rubber glove and latex bedding in government hospitals and clinics,” he said.

MRB director-general Datuk Dr Salmiah Ahmad, meanwhile, said the natural rubber production target for 2014 has been revised downward to 700,000 tonnes from an earlier projection of 800,000 tonnes, as smallholders are hesitant about tapping rubber trees given the declining rubber prices.

MRB data showed that Malaysia’s natural rubber production has declined to 826,421 tonnes in 2013 from its peak of 1.28 million tonnes in 2006, while planted hectarage has decreased to 105,727ha in 2013 from 143,068ha in 2000.

Statistics from the Malaysian Rubber Export Promotion Council reveal that the price for SMR 20 grade has fallen to RM5.13 per kg on Nov 3, 2014 from RM10.09 per kg on Jan 26, 2010, while the price for TSR 20 grade in Singapore has plunged to US$163.50 (RM550.99) per kg on Nov 3 this year from US$300.50 per kg.

“Rubber prices in Malaysia, Singapore, Thailand and Indonesia have slumped, leading rubber tappers to be on cautious mode, which in turn affects production figures,” said Salmiah.

On the price outlook, Uggah said the global natural rubber supply and demand balance is improving, beginning the fourth quarter of this year, on reduction of natural rubber supply and also the increase of natural rubber demand due to the substitution of synthetic rubber.

 

This article first appeared in The Edge Financial Daily, on November 21, 2014.