Rubber prices set to fall further as Thailand plans to offload huge stocks

05 May 2014

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Prices of natural rubber are expected to fall further with Thailand, the world's largest producer of natural rubber, planning to unload huge stocks of the product.

The move that followed the failure of the three Southeast Asian rubber producing countries to set a base price for exports is likely to drive already depressed prices lower in the week ahead.

Natural rubber prices in the region have fallen by more than 30 per cent since the start of the year.

Thailand decided to offload the stock before fresh stock starts arriving in the market later this month, according to agriculture minister Yukol Limlamthong.

This could cushion any further fall in prices, he said. The minister, however, declined to give a specific date.

Latex production slows to a trickle in the low season between late February and the end of May.

Thailand, the world's largest producer and exporter of natural rubber accounting for one-third of supply, has built up a 220,000-tonne stockpile.

The other two members of the International Rubber Consortium, which collectively produce more than two-thirds of the world's natural rubber, are Indonesia and Malaysia.

The rubber market is valued at more than $30 billion a year.

In February, the consortium urged its members not to sell more rubber after prices plunged 7 per cent in the first 10 days of the month.

The Singapore-based International Rubber Study Group has predicted an output surplus of 428,000 tonnes this year, as stockpiles in major consuming countries including China and Japan are high already.

However, despite worries about slowing growth in China, the world's biggest buyer, its imports rose 16 per cent in March from year-earlier levels.

The Thai government's rubber stocks were built up in state-funded price-support programmes, which includes buying rubber at above-market rates to support rural incomes.

The stock would be sold as soon as possible as its quality will deteriorate with time, reducing its value. Besides, storage costs around 20 million Thai baht ($615,800) a month.

 

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