Naturalrubber (NR) prices and

Naturalrubber (NR) prices, which peaked at over RM10.10 a kg in June last year, could top the price this year, due to sapping tree production, low inventory, political instability in Thailand and high prices of synthetic rubber.

NR Prices

A Penang-based trader said NR prices such as for SMR 20 are fast rising due to the on-going wintering season which dampens latex flow as well as a recovering global demand for rubber-based products such as tyres and condoms.

"NR prices are on the rise and are eyeing a new high, its first climb in 18 months and may surpass RM10 a kg in the near term," the trader told Business Times in a phone interview.

Kossan Rubber Industries Bhd technical adviser to the chief executive officer Datuk Ong Eng Long said NR prices are on the rise due to the wintering season as well as strong demand which has always been there despite the global economic slowdown.

"Rubber glove makers for example have been receiving good demand for their latex gloves despite the global economic slowdown.
An industry player who declined to be named said the volatile political situation in Thailand which is the world's largest NR producer will always be a concern for rubber producer and consumers alike thus lending strong support for NR prices.

"Further more, crude oil prices has also topped US$80 a barrel (RM273.60) which in turn has pushed up synthetic rubber prices. This will make NR more competitive."

 market intervention
Meanwhile, a Malaysian Rubber Board official said traditionally demand for commodities such as rubber will shoot up right after an economic crisis due to low inventories during hard times.

Thailand currently operates an intervention scheme with the objective of supporting the price received by rubber smallholders. This price support scheme has apparently achieved its objective but at a very high cost, partly borne by the Government of Thailand and partly by the domestic processing industry. Sales from the stockpile created greater problems for the market and rubber prices than the intervention scheme, as rubber was repeatedly sold below the prevailing market price. As a result, the REO has sufficient funds to continue the current price intervention scheme until its scheduled end in December this year. REO stands for Rubber Estate Organization, the Government agency appointed to conduct the intervention scheme.

The aim of ITRO is to reduce rubber output by 4% starting from this year. This compares well to more than 900 000 tonnes of rubber purchased by the Thai government during their intervention programme (1992 - Present) and over 700 000 tonnes purchased by INRO during the three International Natural Rubber Agreements since October 1980. The reduction in output will reduce global stocks, ceteris paribus, which should have a positive effect on rubber prices. One can safely say that the actions taken by INRO and the Thai government have not lifted rubber prices permanently.