THAILAND: Rubber shipments ready to bounce back

Thai rubber shipments are expected to recover in the second half of this year, boosted mainly by the global economic recovery and higher demand from international automotive tyre makers.

Luckchai Kittipol, honorary president of the Thai Rubber Association, said he remains positive about second-half exports despite the sluggish global market in the first half caused by large and rising global stocks.

Commerce Ministry figures show Thailand exported 45.4 billion baht worth of rubber in the first two months, down by 5.51 % year-on-year.

Mr Luckchai expects global rubber demand to come in at 11.4 million tonnes this year, up by 5 % from last year, and supply at 11.6 million tonnes, up by 3-4 %.

Thailand is forecast to produce 4.2 million tonnes of rubber this year, up from 4 million tonnes last year.

Some 600,000 tonnes will be slated for domestic consumption and 3.6 million tonnes for export.

Export values are likely to be on a par with last year's shipments worth 250 billion baht.

China will remain the main export market, taking two-thirds of Thai exports, followed by Malaysia (12 %), Japan (8 %), the US (8 %), the EU (8 %) and the rest to other countries including South Korea.

However, Mr Luckchai said China's economy is a risk factor, as several international economic agencies are concerned about the possibility of a hard landing, with its economy slowing from a double-digit rate to low growth and shadow banking that may trigger an economic crisis.

Shadow banking is unregulated, high-yield lending that takes place largely off banks' balance sheets.

China's central bank wants to minimise risks related to shadow banking but has shown little interest in shutting it down entirely.

However, Mr Luckchai still believes the Chinese government will be able to manage such concerns and maintain economic growth of 7 % to 7.5 %.

Rubber prices were down by up to 6 % last week as traders rushed to sell on fears the market would become awash with surplus supply after the Thai government said it would start selling its massive stockpile.

Caretaker Agriculture Minister Yukol Limlaemthong has said the government may sell 200,000 tonnes of rubber.

The price drop prompted the Bangkok-based International Rubber Consortium, a grouping of key rubber-producing countries, to quell market panic last Thursday by issuing a statement that the Agriculture Ministry had told the group it had "not made any decision to sell its current natural rubber stocks to the market" and would only consider doing so "if and when the market price of natural rubber is appropriate".

Mr Luckchai, who is also the chief executive of Thai Hua Rubber Plc, Thailand's third-largest natural rubber exporter, proposed rubber stocks be put to domestic use such as road construction if the government did not want to suffer large losses.

Otherwise, exporters such as himself could absorb some supplies amid the low-production season as long as they were not priced too far above market level, he added.

Source: Daily “Bangkok Post”, Bangkok; 9 Apr 2014
(Syed Rashid Ali, Karachi, Pakistan)