Thailand, Indonesia and Malaysia have signed a pact forming the International Tripartite Rubber Organization, despite reports of ruffled feathers between the first two countries over Thailand's sale of its natural rubber stockpiles.
Meanwhile, the future for NR pricing is unclear, as ITRO's gearing up coincided with the preparation of the U.S. Defense Logistics Agency to sell its 72,000 tons of stockpiled ribbed smoked sheet rubber.
The three nations signed the final ITRO agreement Aug. 8 in a ceremony on the Indonesian island of Bintan, off the coast of Singapore. Last December, they fashioned a preliminary pact to form the organization, which calls on member nations to cut NR production and export and buy rubber on the open market with the goal of raising world prices.
ITRO publicists had said the group will start buying rubber the day after the agreement is signed, according to the Web site of rubber trader RCMA Commodities Asia. ITRO won't be satisfied until NR prices reach an ``acceptable'' price level, the Web site quoted Thai Prime Minister Thaksin Shinawatra as saying, adding that he identified $1 U.S. per kilogram as the acceptable level.
The Thai government received about 82.5 cents per kilo for the 130,000-metric-ton stockpile it sold to several companies in late July. News reports have suggested the sales may not have been entirely above board, and Thaksin told Dow Jones News Service he isn't worried about rumblings from Thailand's National Counter Corruption Commission that it planned to investigate the transactions.
Of more concern, however, are the criticisms of Rini Suwandi, Indonesian Trade and Industry minister, who accused Thailand of violating the ITRO agreement. Joining the fray was Asril Sultan Amir, president of the Indonesian rubber association GAPKINDO, who said the Thai sales could drive rubber prices as low as 60 cents per kilo. If Malaysian officials have any concerns about the sale, however, they kept them to themselves.
Although rubber prices did sag somewhat in the last half of July, they rose again in early August. Standard Indonesian Rubber 20-the grade most often used by U.S. tire manufacturers-stood at 341/4 cents per pound, or approximately 75 cents a kilo, at the port of origin (Palembang) Aug. 2, for August delivery.
While the formation of ITRO and the continuing shortfall from the closure of two major Thai rubber-producing firms suggest prices could continue upward, the pending sale of the Defense Logistics Agency rubber may create an opposite reaction.
According to an official DLA communique, the agency tentatively plans to post its first notices of sale on its Web site Aug. 19, with subsequent potential notices to be posted every Monday thereafter by 9:30 a.m.
The selloff seems to be part of a general DLA policy of divestiture, said Dennis J. Fenley, vice president of Patriot Trading Inc. in Danbury, Conn. ``If you look at their Web site, you'll see that rubber is far from the only commodity stockpile they're liquidating,'' he said.
The frozen smoked sheets have been stockpiled for many years, some since the 1950s, Fenley said. The U.S. government made those acquisitions in the aftermath of World War II, when Japan invaded Southeast Asia and cut off NR supplies to the rest of the world.