Business

Monday November 2, 2009

Rubber officials to discuss Agreed Export Tonnage Scheme

By HANIM ADNAN


PETALING JAYA: Senior rubber officials from three major world rubber producers, Thailand, Indonesia and Malaysia, will meet in Langkawi this month to deliberate on the Agreed Export Tonnage Scheme (AETS) that could lead to the official lifting of limits on natural rubber exports imposed last December.

Other issues to be discussed include a review on the demand for natural rubber following signs of improvement in the world economy amid the lower supply situation, an industry source told StarBiz.

“While there have been talk that the three countries have informally lifted their limits, however, it will be officially decided at the meeting in Langkawi given the strengthening of rubber prices in the global market,” the source said.

Thailand is the world’s largest rubber producer with about three million tonnes annually, Indonesia over 2 million tonnes and Malaysia about 1.07 million tonnes.

The source pointed out that the enforced quotas under AETS, which initially planned to slash about 700,000 tonnes of rubber from the world market, had proven to be a good price mechanism to ensure fair prices. Spot rubber prices fell more than 60% in December last year from a peak of US$3.25 a kg in July 2008. Current rubber prices are more than doubled compared with prices last December.

Malaysia’s tyre-grade SMR 20 rubber has risen back to above RM7 per kg currently after falling as low as RM3 per kg late last year as the global financial crisis pulled down the performance of the auto sector, culminating in the lower production of tyres.

The source also does not see Malaysia’s rubber production hitting one million tonnes in 2009 due to the dry weather pattern and reduced tapping by most rubber smallholders following weak rubber prices at the beginning of the year.

“The general fear now is that rubber production might not even surpass 900,000 tonnes in 2009,” he said, noting that rubber production in the first half of this year fell 30% to 380,000 tonnes compared with the same period last year.

However, “lower supplies of rubber will help support higher prices of rubber,” the source added.

Rubber production stood at 1.07 million tonnes in 2008. In Malaysia, smallholders contribute about 94% of the country’s total rubber production.

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