BALI, Indonesia-Natural rubber traders were skeptical of NR-producing countries' plans to form an organization to control rubber supplies and prices, and they're still not sold on the idea now that it's finally happened.
``They say they want to cut output by 4 percent and exports by 10 percent,'' said Lou Mucciolo, senior vice president of the Alan L. Grant Division of Imperial Commodities Corp. in New York. ``You've got to give them the benefit of the doubt, but can they do it, and will that do the job?''
Government ministers of Thailand, Indonesia and Malaysia-the world's top three NR producers, accounting for nearly 80 percent of world supplies-formally agreed Dec. 12 to form the International Tripartite Rubber Organization.
For Thailand and Malaysia, the creation of ITRO was the culmination of more than two years of high-level planning. Both nations sought a producers-only program to replace the International Natural Rubber Organization, which was founded in 1981 with 21 member nations.
INRO disbanded in October 1999, after Thailand, Malaysia and Sri Lanka resigned. Indonesia stayed with INRO to the end, and until earlier this year waffled on whether it would join Malaysia and Thailand in a new NR price-control group.
Before forming ITRO-which before the final agreement was known as the Tripartite Rubber Corp.-Thailand and Malaysia acted on their own plans to buy up rubber from small farmers and store it until prices rose.
World prices, however, have remained at 30-year lows, with Standard Technical Rubber grades hovering around 27 cents per pound delivered to the U.S.
The new agreement will by its very nature be difficult to manage, according to D. Thomas Marsh, president of Centrotrade Rubber U.S.A. in Virginia Beach, Va.
``Thailand alone has a lot of smallholders, and they would have to police the situation,'' Marsh said. It is also difficult to see how prices can be raised when demand is slack, he added. ``We've lost a little steam in terms of the U.S. market because most customers are covered well into 2002'' in their contracts to buy natural rubber.
Even if ITRO is successful in restricting production and exports, ``the market won't feel the effect for the first six months of 2002,'' because NR demand won't be on the upswing until the latter part of the year, Mucciolo said.