Thailand, the largest rubber exporter, reaffirmed a plan to drive local prices to 120 baht ($3.87) a kilogram by buying up supplies, while announcing its intention to push them as much as 50 percent higher than that.
In the second half, “we will revise the target up to 150 baht and will introduce more measures for the price to climb to 180 baht next year,” Nattawut Saikuar, deputy farm minister, said in an interview. The 120 baht goal, 13 percent above today’s level, should be hit as soon as possible, he said.
Higher prices in Thailand, which accounts for about 33 percent of global supplies, may boost costs for companies such as Bridgestone Corp. (5108), Michelin & Cie. and Goodyear Tire & Rubber Co. (GT:US), the top three tire makers. The initial target was announced three months ago by the government, which also has a rice-buying program to try to lift prices of the grain.
“If the government takes action seriously, prices can go up,” Kazunori Kokubo, managing director Yutaka Shoji Singapore Pte., said today. “Now is bad timing as we have financial problems in Europe and China’s economy is slowing down.”
The auctioned price of unsmoked sheet in the Thai city of Songkhla has risen 21 percent this year to 106.41 baht a kilogram today, according to data tracked by Bloomberg. The commodity, which hasn’t traded above 120 baht since September, rose 26 percent the month the purchasing plan was announced, before dropping 0.7 percent in both February and last month.
While smoked sheet on the Tokyo Commodity Exchange has climbed 16 percent this year to 304.9 yen ($3.76) per kilogram, the price fell 3 percent in March and extended its drop April on concern slower growth in China may hurt demand.
The economy in the largest rubber user expanded 8.1 percent in the first quarter, the slowest pace in three years. Bridgestone, the world’s biggest tiremaker, said yesterday that tire demand in China is growing at a slower pace than last year, according to Vice President Makio Ohashi.
Thailand has been in talks with China to increase rubber purchases and to set up processing plants in Thailand, Nattawut said in Bangkok. “I’m seriously driving policy to strengthen the rubber industry,” he said.
On Jan. 24, the government approved 15 billion baht in interest-free loans from the state-run Bank for Agriculture and Agricultural Cooperatives for the Rubber Estate Organization and growers’ cooperatives to buy supplies at above market-rates.
The government will also expand the cutting down of rubber trees to 500,000 rai (80,000 hectares) this year, compared with about 200,000 rai last year, Nattawut said.
“The bureaucratic process may cause slowness in implementing the plans, but once they move at full stream, we’ll definitely see the price breach 120 baht,” Nattawut said. Other measures will be introduced to boost prices to 150 baht, and further to 180 baht, he said, without giving details.
The Rubber Estate Organization is ready to buy rubber from farmers once the Ministry of Finance approves the budget, Managing Director Chanachai Plengsiriwat said by phone today. The agency aims to boost trading volumes, without setting a limit on the amount that may be bought, and will sell supplies to overseas buyers at so-called favorable prices, he said.
A plan for the industry will be drafted to boost export revenue to 1 trillion baht in 2013 from an estimated 680 billion baht this year, Nattawut said. The ministry will also discuss with Indonesia and Malaysia, the second- and third-largest producers, ways to stabilize prices, he said.
The Thai government has been buying rough rice from farmers at above-market rates since October last year in a bid to shore up domestic prices and lift rural incomes. The country is the world’s largest rice exporter.
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