From the Oct. 15, 2012, issue of Rubber & Plastics News)
WASHINGTON—Natural rubber prices would soar if the world's three largest NR-producing nations succeed in a market manipulation they instituted at the start of October. So far, they haven't.
NR prices increased sharply in early October at the start of an eventual 300,000 metric tons cutback in exports by Thailand, Indonesia and Malaysia—the members of the International Rubber Consortium. However, a week later prices inched back down because of a general softness in demand, industry experts said.
The IRC announced in August its members will reduce exports by 180,000 tons in October-December 2012 and 120,000 tons in January-March 2013.
The IRC nations also agreed to cut down more than 247,000 acres of aging Hevea trees to accelerate a replanting program. That move, the member governments said, will slice production by an additional 150,000 tons.
The consortium—whose members represent about 70 percent of total world NR output—said it wants to shore up world NR prices, which had tumbled 15 percent since January 2012.
In the week of Oct. 1, the IRC's actions seemed to have the intended effect, with prices reaching a four-month high. The price of Standard Indonesian Rubber 20—the grade of NR most often used by U.S. tire makers—reached $3.11 per kilogram that week, compared with a low of $2.40 per kilo in August.
By Oct. 8, however, SIR 20 prices had slipped slightly, to $2.99 per kilo.
Greg Jagt, vice president of trading at Oakville, Ontario-based Astlett Rubber Inc., said the cutbacks will be a significant factor over the next six months, but market fundamentals as always will be the most important determinants of where NR prices go.
“The truth is that the rubber surplus is not too large right now,” he said. “Also, you have to consider conditions in countries such as Vietnam, where prices went up because there was a lot of rain in that region.”
Market fundamentals—the basic situation of supply and demand—always are paramount in determining NR prices, according to another NR industry source who asked to remain anonymous.
“The whole story is that fundamentals are weak,” he said. “I've seen rubber at $6 per kilo, and I've seen it at $1 per kilo, but I think we might be stuck in a narrow range around $3 per kilo for some time. More negative numbers from Europe or China could affect that, but existing price values seem to be at fair values for both producers and consumers. It seems like a balanced price.”