Gapkindo rejects discount, cancellations

The Indonesian Rubber Association (Gapkindo) is urging its members to reject discount proposals from buyers and cancellation of purchase contracts to push up rubber prices in the overseas market.

Gapkindo executive director Suharto Honggokusumo said on Monday that the move came after a joint commitment from the ASEAN Rubber Business Council (ARBC), whose six member groups accounted for 80 percent of the world’s rubber output, to reject price adjustments through discounts and avert cancellation of purchase contracts during a meeting in Hanoi, Vietnam, on Saturday.

The ARBC comprises trade associations from Cambodia, Indonesia, Malaysia, Singapore, Thailand and Vietnam.

The commitment was driven by a “deep concern” over the drop in rubber prices — down by 30 percent since mid-September, according to the association’s emailed statement sent on Monday.

“Approval on requests for discounts will be followed by other requests from other buyers which will encourage the price to further decline as buyers will wait to negotiate contracts to get lower prices,” Suharto told The Jakarta Post over the phone.

In line with the recommendation, Suharto said, ARBC-based associations would also blacklist buyers who dropped contracts, and members would be instructed not to make transactions with the blacklisted buyers.

“The ARBC encourages its members to end all contract disputes under agreement, and if this fails, the cases will be brought before an arbitrary body and later to courts, which will issue a legal ruling over the matter,” he said, adding that he was upbeat that the moves would successfully ramp up the prices to a stable level.

Rubber prices have plunged this year over concerns that European financial woes will curb global economic growth and push down demand for rubber.

Rubber prices have declined by 32 percent this year, losing 21 percent since Sept. 15, Bloomberg reported on Monday from Tokyo. The May delivery contract settled at ¥283.6 (US$3.64) per kilogram on Monday after touching ¥286.4 on the Tokyo Commodity Exchange, the highest level since Nov. 8. The price extended last week’s 7.5 percent rally, the best performance since the week ended on Oct. 28.

The International Tripartite Rubber Council (ITRC), which comprises three of the world’s largest rubber producers — Thailand, Indonesia and Malaysia — agreed last month to set the rubber price at $3.50 per kilogram and temporarily halt rubber exports once the price slumped to below $3 per kilogram. It also said it would blacklist contract defaulters to avert a further drop in natural rubber prices in the international market.

Indonesia, the world’s second-largest rubber producer, annually contributes around 30 percent of the world’s rubber supply. It exports rubber mainly to the United States, Japan, China, Singapore, South Korea, Germany and Canada.

Gapkindo recently estimated that Indonesia’s natural rubber exports would likely slide to 500,000 tons in the fourth quarter this year from a quarterly average of 600,000 tons during the previous quarters due to weaker demands since October from key buyers including China.

“Speculation grew that European leaders may take further steps to contain the crisis,” Takaki Shigemoto, an analyst at research company JSC Corp. in Tokyo, said on Monday.

“Rubber also drew support from oil amid concerns about tensions in Iran.”

Oil climbed for a second day in New York. Iran believes prices will surge above $250 a barrel if other nations try to ban purchases of its crude, Tehran-based newspaper Shargh reported, citing a Foreign Ministry spokesman.

The benchmark Thai rubber price dropped 0.9 percent to 104.95 baht ($3.41) a kilogram on Dec. 2, the Rubber Research Institute of Thailand said on its website. The market is closed on Monday for a public holiday.