JAKARTA (TheInsiderStories) – Indonesia, Malaysia and Thailand, who are members of the International Tripartite Rubber Council (ITRC) which also control the world’s rubber production have reached an agreement to establish a Regional Rubber Market (RRM) by June 2016 as a move to stabilize the world’s rubber price.
The three countries said in a joint communiqué issued after the meeting in Jakarta that the RRM is “an initiative of member countries in providing a platform for better price discovery and effective hedging functions which would ultimately benefit the producers, consumers and market players around the world.”
Indonesia Trade Minister Thomas Lembong said at a press conference after the meeting in Jakarta that in order to realize the plan, the rubber council has established two technical working groups to accelerate the drafting of related bye-laws and exchange rules and regulations including technical specifications and arbitration resolution procedures.
They also agreed to set up an ITRC secretariat office in Jakarta. “Even though, the RRM is to be established by June 2016, but the 3 ministers urged ITRC/IRCo to expedite the establishment to be within 3 months to the extent possible,” the communique said.
The decision to establish RRM came as the world rubber price hit as low as US$2.5 per kilo, far below a peak of US$4.5 per kilo few years ago. This has resulted in a decline in production and hit rubber producing countries, including smallholders.
In the communique, the ministers also expressed their concerns on the prevailing low natural rubber prices which are below the cost of production despite declining global natural stock and production.
It was reported by the International Rubber Study Group (IRSG) that global natural rubber stock in September 2015 was 2.8 million metric tons (MT) compared with 3.2 million MT in 2014. While LMC reported 2.0 million of global NR stock as at end September 2015 which is 0.8 million MT lower than IRSG’s figure.
The ITRC members also noted that the natural rubber production of the 11 member countries of the Association of Natural Rubber Producing Countries (ANRPC) which accounts for 92 percent of global NR production is expected to decrease by 0.1 percent from 10.95 million MT to 10.94 million MT this year. The decline in production was contributed by low prices, as smallholders have switched to other economic activities.
Minister Thomas Lembong said that in addition to establish a regional rubber market, member countries also agree to increase domestic natural rubber consumption by 300,000 tons for road construction and other areas such as rail rubber pads, dock fenders and other infrastructure projects.
“In this context, the three countries will exchange technology and expertise in the use of natural rubber for new road construction and resurface,” Minister Lembong said, citing the joint communiqué.
The rubber council also agreed to start a study to be completed within one month for the possibility of implementing a subsequent Agreed Export Tonnage Scheme (AETS) in 2016, a kind of export quota for member countries.
Minister Lembong also added that Vietnam has expressed interest to join ITRC as a strategic partner. The three ITRC countries and Vietnam will represent 74.3 percent of global natural rubber production.
At the press conference, Minister Lembong was accompanied by H.E. General Chatchai Sarikulya, Minister of Agriculture and Cooperatives of the Kingdong of Thaialnd and H.E. Datuk Amar Douglas Uggah Embas, Minister of Plantation Industries and Commodities of Malaysia. (*)