Malaysia, the world's third-largest rubber producer, has begun implementing its plan to cut exports by about 5 percent this year, a minister said on Thursday amid doubts whether the measures would revive prices. The export cut was in line with Malaysia's commitment along with top producers Thailand and Indonesia to remove some 915,000 tonnes of rubber from the market, though investors say forcing traders to ship out less rubber would only hurt smallholders.
The three Southeast Asian nations, which form the International Rubber Consortium (IRCo), indicated this week that further reductions of up to 1.345 million tonnes would only happen if prices, which have more than halved from a 56-year high in July, weaken further.
Demand for rubber has shrunk, thanks to fast-falling industrial demand from tyre makers such as France's Michelin that consume 70 percent of world output and plummeting crude oil prices, which make its synthetic rival much cheaper.
"We have already instituted the process of reducing the exports this year. Quotas have been given to the trading houses here. The replanting programme is also happening," Chin told reporters in the Malaysian capital. "For the first quarter, Malaysia will reduce rubber exports by 22,000 tonnes. For the whole of 2009, it will be (cut by) 57,050 tonnes."
Last year, the Southeast Asian nation exported 1.1 million tonnes of mainly standard Malaysian rubber. Malaysia has proposed a meeting between the ministers of these top rubber producing countries under the auspices of IRCo on February 12-13 in Kuala Lumpur, Chin said.
The ministers are expected to discuss a revision in the floor price currently set at $1.35 per kilogram, assistance to smallholders along with the issue of non-fulfilment of contracts. IRCo, which accounts of 70 percent of total output, has come under fire for not doing enough to shore up prices and traders remain sceptical about the measures, along with Malaysia's latest announcement.
"The details so far are not very clear, this is just pandering to home countries and markets, which have not really responded," said a top rubber trader in the Malaysian capital. "Imposing a reduction on how much trading houses or companies can sell abroad is only going to be worse for the smallholders who rely on rubber to survive."
Smallholders own most of the estates in Malaysia, Thailand and Indonesia. Thailand early this week announced plans to buy at least 200,000 tonnes of rubber to support farmers while Malaysia was mulling a proposal to give credit facilities for dealers to buy up rubber stocks.
Key Tokyo rubber futures turned lower on Thursday as stocks erased earlier gains and the yen hovered near its lowest since 1995, but traders expected losses to be limited with oil prices rising. Cash rubber prices have plummeted more than 52 percent from July's peak of $3.25 a kg, with benchmark Thai rubber around $1.52 per kg on Thursday.
"The announcements by Thailand and Malaysia to help the smallholders through direct buying and credit lines might not be enough. They (the governments) cannot do much in the face of this global recession," said another trader in Singapore.
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