Indonesia, Malaysia and Thailand to cut rubber exports

Indonesia, Thailand and Malaysia supply 67 per cent of the world’s rubber. In addition to reducing exports, the countries also agreed to increase domestic consumption of natural rubber, such as in infrastructure projects.

According to a statement issued by the ITRC secretariat, the council is optimistic the measures will trigger a recovery in rubber prices and ensure fair and remunerative prices to all smallholders and other stakeholders in the industry.

“The export reduction will make markets absorb existing global rubber supplies (thus stabilising the price),” the Trade Ministry’s acting director general for foreign trade, Karyanto Suprih, told a press briefing in Central Jakarta on February 4, 2016.

The agreement was a follow up to an ITRC meeting in December in Jakarta in which the three countries discussed efforts to maintain a global supply-and-demand balance amid a price slump and low production in the three nations.

Given the big chunk contributed by the countries, the export reduction is expected to help prop up the global rubber price.

Bloomberg data shows that the rubber price has nose-dived more than 70 per cent since its peak during the commodity boom in 2011. The commodity traded at 155.9 yen (US$1.32) per kilogram on Thursday.

Indonesian Rubber Producers Association (Gapkindo) chairman Moenardji Soedargo said on the sidelines of the event that the association’s members, particularly exporters, fully supported the export reduction plan as they also hoped the temporary step would eventually result in a better rubber price. “Exporters will hold their breath,” he said, asserting that the brakes would not be put on production.

Indonesia, the world’s second-largest rubber producer after Thailand and before Vietnam, produced 3.2 million tons of rubber last year, down from 3.5 million to 3.8 million tons in previous years.

Moenardji said that of total production last year, 2.6 million tons were exported while 580,000 tons were used for domestic consumption.

The association has yet to set a production target for this year as it is still estimating the effects of forest fires and the prolonged dry season on rubber trees, although it expects it will be lower than last year, Moenardji said.

Meanwhile, the ministry’s director for exports of agriculture and forestry products, Nurlaila Nur Muhammad, said the government had tried to create more domestic demand for rubber through its infrastructure projects.

“Our ministry along with the Industry Ministry, the Public Works and Public Housing Ministry and the Transportation Ministry will focus on rubber use in roads and port dock fenders,” she said, adding that the ministries were deliberating required regulations. She expressed hope that the project could be realised in the 2017 state budget.

Moenardji said government projects would absorb about 100,000 tons of national rubber.

Futures jumped by as much as 3.2 per cent, the most since Jan. 22, to 158.5 yen ($1.32) a kilogram and settled at 157.3 yen ($1.30) on the Tokyo Commodity Exchange following the export cut announcement, Bloomberg reported.

The export price of Thai ribbed smoked sheet number 3 rose 0.7 per cent to 45.05 ($1.26) baht a kilogram, up 3.6 per cent this year.