Indonesia rubber group calls for 10 percent cut in output

ERJ staff report (TP)

Jakarta − Indonesia's main rubber grouping is calling on the world's second largest producer to cut output next year by 10 percent, while urging other Southeast Asia rubber-growing countries to do the same to reduce global stocks and support prices, reported Michael Taylor for Reuters.

Tokyo rubber futures, which set the tone for physical rubber prices in Southeast Asia, have dropped nearly 10 percent this year on concerns about the global economy and as regional supplies have swelled.

Rubber inventories in world top consumer China monitored by the Shanghai Futures Exchange fell more than 10 percent last week, but remain at near nine-year highs.

"Last month I issued a letter to our members to reduce the production next year by 10 percent," Daud Husni Bastari, chairman of the Indonesian Rubber Association (GAPKINDO), said.

"We would like to send a message to the big tire manufacturers," said Bastari, whose association includes rubber processing factories, plantations, co-operatives and traders.

Rubber producers and farmers need higher prices for their product, Bastari said, because their cost of living has gone up but they haven't benefited from steady or higher tire prices.

GAPKINDO is the biggest and most influential of rubber industry groups in Indonesia.

Indonesia's 2013 rubber output will be little-changed at 3.1m tonnes, Bastari said, with gains hampered by wet weather and curtailed by an earlier agreement with fellow producers Thailand and Malaysia to trim exports.

The earlier agreement ran from August 2012 to March of this year, with the three largest rubber producers agreeing to cut their exports by a total of 300,000 tonnes.

The impact on prices was short-lived, but Thailand still tried to extend the agreement for two more months before abandoning it at the end of May.

Indonesia, Thailand and Malaysia account for about 70 percent of world output, with major tire makers that include Bridgestone Corp, Michelin and Goodyear Tire & Rubber Co taking most of their output.

Given the growing emergence of other Asian rubber producers, like Vietnam, earlier this year Bastari said a group of rubber producing countries within the Association of Southeast Asian Nations (ASEAN) would achieve the best results in any future pricing support effort.

"It should be an effort together," said Bastari, who is also chairman of the ASEAN Rubber Business Council (ARBC) − a grouping of Cambodia, Indonesia, Malaysia, Singapore, Thailand and Vietnam.

Bastari said associations in Thailand, Malaysia, Vietnam, Laos and Cambodia will be asked to join Indonesia in the output cuts for next year.

Officials at the Malaysian Rubber Board and the Malaysia's plantation industries ministry said they had not heard of any suggestion for rubber production cuts from Indonesia.

The matter could be discussed at a planned meeting with ASEAN producers early next year, they said.

"At this junction, there is no active measure to cut output. At the moment rubber output in Thailand, Indonesia and Malaysia is still below the target that we have set for ourselves," said an official with Malaysia's plantation industries and commodities ministry.

"In Malaysia's case, we are cutting down old and unproductive trees and launching replanting programmes, as well as looking to enhance productivity," the official added.

Vietnam, the world's third-largest natural rubber exporter after Thailand and Indonesia, aims to keep its rubber output next year unchanged at around 1m tonnes, a rubber industry official said.

But "we will try not to apply measures for raising yields and also avoid new investment in rubber plantations," said the official, who declined to be identified by name as he was not authorised to speak to the media.

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Full story from Reuters