23. October 2006
MALAYSIA: Rubber industry regains its shine
Source: Daily "The Star", Kuala Lumpur; 23 Oct 2006
The negative perception of rubber being a sunset
industry is fast diminishing given its exciting
MARDEC group chief executive Datuk Dr Mahmood Abd
Kadir said for the first time in history, rubber was
traded at over RM3 per kg on average over the last
four years, at more than RM4 per kg for over three
years and more than RM6 per kg for the past 12 months.
“This had never been experienced before by the
one-century-old industry,” said Mahmood, who is
Malaysia's representative and chairman of
International Rubber Consortium Ltd (IRCo), a
tripartite consortium comprising three world rubber
producers – Malaysia, Thailand and Indonesia.
IRCo acts as a mechanism to ensure fair and
remunerative rubber prices to protect rubber planters
of the three countries. It was given a mandate by the
three producing nations to implement the Supply
Management Scheme (SMS) and the Agreed Export Tonnage
The price of natural rubber shot up to RM8.52 per kg
in June, before stabilising at RM6.30 to RM6.70 per kg
“With demand and supply almost matched, I believe
prices will remain firm with an average of over RM6.50
per kg this year, which is higher than last year's
average of about RM5.20 per kg,” said Mahmood.
Backed by the high crude oil prices, strong demand
from China and abnormal rainfall which affected major
producing areas in southern Thailand and northern
Malaysia, he is confident that rubber will not likely
be traded below RM3 per kg.
Mahmood cautioned industry players on potential
threats, such as the:
economic slowdown in Western countries;
the unexpected hard landing of China's economy and;
terrorist attacks that would affect rubber consumption worldwide.
Barring unforeseen major disruptions in supply and
demand, he said, rubber prices would trade in the
RM5.50 to RM7.50 per kg range at least over the next
one year based on existing fundamentals.
Mahmood also attributed the current commendable rubber
prices to IRCo's effectiveness in monitoring the
market sentiment. In 2003, the decision by the three
countries to intervene by implementing AETS helped in
the recovery of rubber prices to USD 1.17 per kg from
its 30-year low of USD 0,48.
“IRCo is not about price stabilisation but ensuring
fair and remunerative prices for rubber smallholders,”
Through its two schemes (SMS and AETS), IRCo was able
to carry out its role more effectively than the
defunct International Natural Rubber Organisation
(INRO), which acted as a buffer stock manager for
“INRO was successful in achieving price stabilisation
(for rubber) but at a low price. Its failure was due
to the high stocks build-up, thus creating an overhang
supply situation which was detrimental to the market
sentiment,” he said.
Under IRCo's SMS, Mahmood said, the consortium was
able to coordinate the NR growth and ensure the
respective producing countries did not overproduce.
“We are able to implement growth plans according to
the world market demand, and this will not create an
oversupply situation,” he said, adding that should an
oversupply situation occur, the consortium would then
implement its AETS scheme to ensure that the three
producing nations hold back their exports by a
mutually agreed quantum.
Mahmood said IRCo was also trying to get Vietnam to
join the consortium. “We believe Vietnam, which is
currently the world's fifth largest rubber producer at
470,000 tonnes per year, can grow to as big as
Indonesia in the foreseeable future,” he added.
Thailand is the world's largest rubber producer at
3.1 million tonnes, followed by Indonesia (2.3 million),
Malaysia (1.1 million) and India (770,000 tonnes).
(Syed Rashid Ali, Karachi, Pakistan)