VIETNAM: Vietnam's rubber cut too small for impact - Exports still earning revenue for Hanoi

Vietnam's plan to cut its rubber shipments by almost a third this year is unlikely to help boost world rubber prices much since the actual cut might not be as large as planned, according to the Thai Rubber Association.

"Despite the announcement, Vietnam is unlikely to reduce its rubber exports by as much as 200,000 tonnes in practice, as it is now trying to earn more revenue from exports," said Luckchai Kittipol, president of the Thai Rubber Association. "A cut of 20,000 tonnes is more likely."

Vietnam, the world's fourth-largest rubber exporter, said yesterday it would cut the shipments by as much as 31% this year as the global economic slowdown has reduced demand.

The country will reduce exports by as much as 200,000 tonnes, taking the combined reduction by the four largest producers of the commodity to 1.1 million tonnes, the Vietnam Rubber Association said in a statement.

Thailand, Indonesia and Malaysia, the top three suppliers, agreed last year to pare output to bolster prices, which dropped from a 28-year high in June to a six-year low on Dec 5.

A global recession has slashed demand for vehicles and tyres while declining crude oil prices have reduced the cost of rival synthetic rubber.

The three countries, whose production accounts for 70% of global supply, agreed in October to jointly trim output by 215,000 tonnes, mainly by replanting trees.

They further decided to cut exports by a combined 700,000 tonnes in 2009 and keep stockpiling. In 2008, the three countries exported about 5.5 million tonnes of rubber.

Vietnam shipped 645,000 tonnes, or 97% of its total output, in 2008, down 9.8% from a year earlier, according to the association.

In any case, Mr Luckchai said Vietnam's statement might have a psychological impact on the market, as purchase orders from China resumed.

He forecast Thailand may ship 200,000 tonnes this month, a drop of around 10% from January last year.

Export prices, however, are likely to be much lower than last year. The prices of ribbed smoked sheets now stand at only US$1,500 to $1,600 per tonne compared with $2,600 in January last year.

Thailand is expected to export about 2.4 million tonnes of rubber this year, down by 300,000 tonnes from a year earlier, generating revenue of less than 200 billion baht. Shipments were estimated at 2.7 million tonnes last year, earning about 250 billion baht.

(Syed Rashid Ali, Karachi, Pakistan)