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Thailand to Propose Extending Rubber Export Cut Another Year

Thailand, the biggest rubber producer, will propose extending a reduction in shipments from top suppliers for a further year to curb a price slump, said Deputy Farm Minister Yuttapong Charasathien. Futures climbed.

Thailand, Indonesia and Malaysia, which represent about 70 percent of global output, have completed the 300,000 metric tons of export cuts they announced last year and removed aging trees, said Yuttapong, who is in charge of the nation’s rubber policy. The countries will meet in Phuket on April 10-12 to discuss the Thai plan, he said in a phone interview.

Rubber traded in Tokyo plunged 19 percent from a 10-month high in February, cutting costs for tiremakers such as Bridgestone Corp. (5108), as rising stockpiles in China, the top user, spurred concern that demand was weakening. Futures rallied 15 percent in 2012 after the three countries agreed to limit exports from October to March and cut down trees, removing a total of 450,000 tons from the market.

“The reduction in exports did boost the price for a short period of time, but more measures are needed for long-term price stability,” Chaiyos Sincharoenkul, president of the Thai Rubber Association, said by phone today.

Rubber for delivery in August gained 0.9 percent to close at 273.3 yen a kilogram ($2,864 a ton) on the Tokyo Commodity Exchange today. Futures had reached 337.8 yen on Feb. 6, the highest level since March 28.

Export Cuts

Thailand has put on hold plans to plant trees and will review its domestic purchase program when it ends in March, the minister said. The country has no plan to sell from stockpiles accumulated after the government started a 45-billion baht ($1.5 billion) price-support program for its farmers last year.

The three countries may extend export cuts if prices drop below $3 per kilogram, Darmansyah Basyaruddin, chief executive officer of the International Rubber Consortium, which coordinated the reductions, said on Feb. 27.

The producers should focus more on managing supplies from plantations to boost prices, rather than cutting exports, Daud Husni Bastari, chairman of the Rubber Association of Indonesia, said by phone from Jakarta. Curbing sales “is only a temporary measure and shock therapy for the market,” he said.

The global surplus may shrink 61 percent in 2013 as consumption rises to a record, according to the 35-nation Singapore-based International Rubber Study Group. A fourth consecutive year of expanding demand will narrow the surplus to 179,000 tons this year and 153,000 tons in 2014, from 460,000 tons in 2012, the IRSG predicted in January.

Inventories in China climbed to 113,803 tons, the highest level since January 2010, the Shanghai Futures Exchange said March 15. Global stockpiles reached a seven-year high of 2 million tons at the end of 2012, enough to meet North American demand for about two years, according to IRSG data.

To contact the reporter on this story: Supunnabul Suwannakij in Bangkok at ssuwannakij@bloomberg.net

To contact the editor responsible for this story: James Poole at jpoole4@bloomberg.net

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