Thailand intervenes with the rubber gloves industry
by Kyra Law, kyralaw@thebornepost.com. Posted on February 4, 2012, Saturday
KUCHING: Thailand government’s intervention in the rubber gloves industry by offering soft loans of five billion baht to local agricultural institutes and 10 billion baht soft loans to the Rubber Estate Organisation will enable latex prices to stay above RM7 in the short term.
OSK Research Sdn Bhd (OSK Research) affirmed that the intervention was done through the Bank of Agriculture and Agricultural Cooperatives to increase the price of locally-grown natural rubber.
The intervention was due to the poor rubber prices arising from several factors, such as the global economic slowdown, flooding crisis in Thailand which had temporarily suspended its production of automobiles and parts plus the slower automotive growth in China.
“The latex price may stay above RM7 in the short term due to the uplift in sentiment for the commodity created by the Thai government,” said Jason Yap from OSK Research .
“Unless the Thai government continues to support the price of rubber in the longer run, the price would still be ultimately decided by the forces of demand and supply.
“An oversupply situation of rubber in the global market will continue as existing rubber plantations are likely to resume their usual production after the wintering season,” added Yap.
There had been isolated cases of bird flu in Asia and though it had not reached alarming levels yet, healthcare multinational corporations might prepare themselves by gradually stocking up rubber gloves to avoid buying them at a ‘cut throat’ price if a pandemic broke out.
China had slowed down its purchase of Thai natural rubber and switched to cheaper Indonesian rubber. The cost spike was not good for all rubber glove manufacturers since they would experience a time lag in passing on negative cost impact to customers.
However, the research house stated that most rubber glove manufacturers had been seeing an increase in sales orders for the rubber gloves in this period of time as customers appeared to be replenishing inventories after having minimal stock levels earlier in anticipation of further drops in latex prices.
“For the industry, the risk to our view would include further artificial support of rubber prices by the Indonesian and Malaysian governments as the ringgit continues to strengthen against the US dollar,” said Yap.
