Natural rubber prices expected to stay firm.

Natural rubber prices are expected to remain firm in the near to medium term on the strong sentiment prevailing in the market following solid cooperation among the world's three main producers. "The formation of a rubber tripartite organization has brought about stability in prices and I expect it to stay firm for quite a while," said Plantation Industries and Commodities Deputy Minister Datuk Anifah Aman.

Thailand, Indonesia and Malaysia, the world's first, second and fourth biggest rubber growers, respectively, teamed up in October 2003 to form the International Tripartite Rubber Co. (ITRC). ITRC aims to purchase, manage and sell NR in the open market with an agreed allocation of $225 million. It cut exports by 10% and output by 4% in 2002 and 2003.

Due to the move, traders have observed a global production curb of 170,000 mt and a cutback of 380,000 mt of NR exports from the market. Today, the ITRC's presence has supported NR prices such as for SMR 20 Ca rubber grade), for example, which more than doubled to RM4.40 a kg from RM1.91 a kg in December 2001.

However, there were also concerns over a possible supply shortage following unrest in southern Thailand in May. The unrest also saw NR prices rising to RM5 a kg, but they have since fallen back to stabilize at the current RM4.40 a kg level. Southern Thailand produced about 80% of Thailand's 2.3 million mt rubber output last year.

Formation of a producers tripartite organization, robust demand from China and low stockpiles of the commodity have all helped push prices upwards recently.