Falling prices of rubber leads to protests, formation of cartel

Global Business

Top Asian rubber producing countries have agreed to establish a cartel to control world prices following a slump in demand that has caused plummeting rubber prices. CCTV America’s Martin Lowe reported this story from Bangkok.

Falling prices of rubber leads to protests, formation of cartel

Top Asian rubber producing countries have agreed to establish a cartel to control world prices following a slump in demand that has caused plummeting rubber prices. CCTV America's Martin Lowe reported this story from Bangkok.

Desperate rubber growers in Thailand are also demanding greater help from the government through demonstrations where they risk jail due to a ban on public protests by the military-run government.

They said they have no choice but to defy the law, after rubber prices crashed 75 percent in the last four years, bringing bankruptcies and ruin to thousands of growers.

“We are working at a loss. It costs us more to grow rubber than we are paid for it. We have already cut production and soon we might have to stop altogether. We’re living off our savings,” said Perk Lertwanpong of the Thailand’s Rubber Growers Cooperative Federation.

Thailand, Indonesia and Malaysia produce 70 percent of the world’s natural rubber. The countries said the cartel they have formed, the Asian Rubber Exchange, will limit exports and raise prices.

“We have no intention to manipulate the rubber market, but we intend to manage prices as fair. It means we have to manage supply, said Yium Tavarolit, the chief executive of International Rubber Consortium. “We cannot dictate rubber prices or interest consumers to buy at this or that level, so we have to manage our supply in order to make the price equilibrium or accepted by consumers, not too high, not too low.”

Producers hope the exchange will halt fluctuation in markets, that coupled with a slowdown in demand, has seen the price of rubber sheet fall to just $1.6 a kilo (3.53 pounds), compared to a high of $6.4 in 2010.

A year ago, before martial law was introduced, rubber protests in the south of Thailand turned violent, with dozens of police and demonstrators hurt. In recent days, the government’s pledged $1.8 billion to support growers, but they said it was not enough. They wanted a direct subsidy, which the government has refused.

It could take 18 months to establish the Asian Rubber Exchange, so there’ll be no quick fix for these besieged growers.