By Huileng Tan

The Thai government’s tardiness in kick-starting its planned THB15 billion ($488 million) rubber price-intervention scheme is keeping the bounce out of natural rubber prices, as confidence falters during the ongoing low-production season.

Mooted in January after a growers’ protest against falling prices, the buy-back scheme aims to push up raw material rubber prices to THB120 a kilogram, and is seen as a populist move to garner support for the current government in the major producing region of southern Thailand, a traditional stronghold of Thailand’s opposition Democrat Party.

The Thai government did not issue an official timeline on the implementation of the scheme, though which the government would buy rubber from growers to help boost the price. But some officials and trade participants expected to see movement on the plan by around mid-February. However, the market has yet to see any action even well into March, when output could fall by as much as 40%-50% due to seasonal factors.

The Director of the Office of the Rubber Replanting Aid Fund in Thailand, Wit Pratakjai, said the scheme is now expected to start at the end of March, as the legislative process is taking time.

“We had expected it to start sooner, but we need to follow legal processes,” said Mr. Wit, who added that the THB120/kg price target remains.

Thai Rubber Association President Pongsak Kerdvongbundit said he has no doubt that the government will keep its word but cited a “loss of confidence” in how delays are keeping prices depressed.

Current raw material (unsmoked sheet 3-grade) prices at the three central rubber markets are around THB109/kg. The announcement of the plan did give prices a push from the THB90/kg level before the protest, but prices are still below the government recommended floor rate, as global macroeconomic concerns have been dampening sentiment.

“Without the implementation of the plan, natural rubber prices may hit the THB120/kg level these few months (due to seasonal factors), but then because there are expectations that are not fulfilled, this becomes a bearish factor for the market and prices will be kept lower than their real levels, because buyers think they can get them at lower prices,” said Mr. Pongsak, who is also managing director of Von Bundit Co., Thailand’s top natural rubber exporter.

The delay is also allowing for too many rumors to float on the market, causing market uncertainty, he said. Growers expecting faster action from the government have also been stuck with stockpiles, though some sold them away in recent weeks to meet capital requirements.

“Everything is too slow,” said Mr. Pongsak, who urges speedier action in the implementation of the multi-million dollar scheme.

http://blogs.wsj.com/searealtime/2012/03/16/thailands-rubber-plan-delay-stretches-patience/
(ldtn)