Market and product

BANGKOK, April 13 - Rubber prices have beenvolatile in the past two months, tumbling about a third from amid-February record high, before recouping the losses and easing again this week on fears that costly commodities couldslow economic growth and hit demand.

Such uncertainties have prompted rubber-producing nations toseek ways to stabilise the market.

Here are some previous interventions by the world's topthree producers -- Thailand, Indonesia and Malaysia -- to helpshore up prices.

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-- The latest was in mid-March, when the goverment ofThailand, the world's biggest rubber producer and exporter, saidit would use all means to boost the price of unsmoked rubbersheet (USS3) and keep it above 120 baht per kg, which equates toaround $5.0 per kg of export-grade smoked rubber sheet (RSS3).

Thailand had planned to hold an urgent meeting of the threetop producers to discuss measures to stabilise prices. It cameafter the price of the USS3 grade, the raw material forexport-grade RSS3, halved from a record of 180 baht ($5.97) to95 baht, due to fears of falling demand after a major earthquakeand tsunami hit Japan.

The quake also slashed Tokyo rubber futures prices by 40percent from the record high of 535.7 yen per kg. They dipped aslow as 335.0 yen per kg and dragged physical prices downsharply.

The intervention, however, was purely verbal, analysts andtraders said. Thailand reversed its stance a few days later whenprices recovered, due mostly to funds' speculative buying. Themeeting never took place.

Thailand said no special measures were needed as pricescould stay firm at a time when supply was falling due to theimpact of dry weather on rubber output. However recent floodsand mudslides in the rubber-producing southern regions alsoreduced production, and traders said Thailand may not producethe targeted 3.3 million tonnes this year, setting a floor forprices.

-- In late 2008, the top three producers agreed to cut combined exports by 915,000 tonnes for the following year toshore up ailing rubber prices, which fell to as low as $1.10 perkg on concerns over falling demand due to a looming globaleconomic recession.

The International Rubber Consortium (IRCo), which comprisesThailand, Indonesia and Malaysia and produces 70 percent of theworld's natural rubber, also urged exporters not to sell smokedrubber sheet (RSS3) below $1.35 per kg.

But prices recovered, despite the intervention, graduallyclimbing back with strong demand from the auto industry in China. Prices rose even further in the second half of 2009, whenexcessive rainfall in Thailand and Indonesia disrupted tappingand cut supplies sharply.

-- The oldest style of intervention dated back to the 1990sand came from the International Natural Rubber Organisation(INRO), which grouped rubber-producing countries withrubber-buying nations, among them Japan and some Europeannations. INRO members pooled money to buy "buffer stocks" tokeep in warehouses so that it could control rubber supply in themarket and keep prices stable.

INRO finally collapsed in 1999, due mostly to a conflict ofinterest between buying and selling countries and complaintsabout a lack of fairness and transparency in managing stocks.

Its demise encouraged Southeast Asian countries to formanother organisation consisting of only rubber-producingnations. ($1=30.145 Thai Baht)