32^nd SESSION OF THE ANRPC ASSEMBLY

5^th November 2009

Ho Chi Minh City, Vietnam

Statement

By

International Rubber Consortium Limited (IRCo)

First and foremost let me congratulate the ANRPC on the auspice occasion of the 32^nd Session of its Assembly and to thank its Secretary-General, Professor Dr. Djoko Said Damardjati, for his kind invitation to the IRCo to this august gathering.

IRCo is indeed honored to be given this opportunity to present its statement to this August gathering. IRCo here is synonymous with the International Tripartite Rubber Council (ITRC) and the statement we are presenting covers activities under the tripartite cooperation for natural rubber between Thailand, Indonesia and Malaysia.

Ladies and gentlemen,

When I last presented a statement to the ANRPC Assembly at its 31^st Session on 28^th  November 2008 in Bangkok, Thailand, natural rubber prices then had already shredded more than 40% from their high in July 2008, and were still slipping, with the IRCo’s Daily Composite Price (DCP) reaching a low of US $ 1.10 per kg. on 11^th  December 2008, due to the onslaught of the financial crisis on Wall Street in September 2008 that saw Wall Street collapsed sending the global economy into its worst recession since World War II.

The Tripartite Cooperation decided that its October 2008 decision to cut production by 215,000 tons through its supply management scheme (SMS) by accelerated replanting would not be sufficient to arrest the tumbling natural rubber prices as the contraction in demand was deepening.

Drastic events called for drastic measures. In addition to the production cut of 215,000 tons through the SMS, on 13^th December 2008, the Tripartite Cooperation announced a 700,000 tons export curb for 2009, under the Agreed Export Tonnage Scheme (AETS), of which 270,000 tons to be effected in the first quarter.

Concurrently, the rubber trade associations of the three countries also agreed to advise their members not to offer rubber for export below US $1.35/kg.

In a market situation where demand was plummeting and prices were free falling, the announcement made on Saturday 13^th December 2008 did affect sentiment and turned the market around. Prices picked up thereon and ended the year above the US $1.35/kg. level.

As of the first trading day of January 2009, when the initial 270,000 tons first quarter allocation under the AETS was put into motion and exporters in the 3 countries refrained from offering rubber for export below US 135 cents/kg., prices continued to improve even though demand was still sluggish.

For the first quarter of 2009, prices averaged around US 140 cents/kg. Another 144,000 tons was allocated under the AETS for the second quarter of 2009.  Prices improved further and averaged around US 160 cents/kg. for the second quarter - a US 25 cents price improvement per kilogram from January to June 2009.

For the third quarter, prices averaged around US 190.00 cents/kg. In fact, by the end of the first week of September, prices for all the popular grades had breached the US $2.00 mark and remained above that level up to now.

Looking at the statistics, exports from the tripartite countries for the first quarter of 2009 dropped by 386,000 tons compared to the same period the previous year. And for the second quarter 2009 by another 214,000 tons. Altogether by 600,000 tons for the first half of 2009 as compared to the same period the previous year, whilst the target under the AETS for this period was only for 414,000 tons. There was no doubt though that the significant drop in production during this period did help to ease the burden under the AETS.

The only positive or bullish factors present in the market during this period were the activities of the Tripartite Cooperation, the active buyers from China and inclement weather. The impact of the activities of the Tripartite Cooperation had somewhat managed to “stop the bleeding” at the initial stages and maintained prices at levels that can be considered more than reasonable in such trying times.

More importantly is that the price improvements have been able to sustain the smallholders to continue with their rubber activities to support their livelihood.

The global economic downturn has slowed down but had not reached its bottom. The beginning of the upturn is expected late this year or some time in 2010 and recovery is expected to be uneven and will take another 2 to 3 years. Demand for all commodities, including rubber, is expected to improve gradually but will still be sluggish.

Whilst natural rubber prices has improved significantly since the beginning of the third quarter of 2009 and the Tripartite Cooperation has put on hold further allocation under the AETS, we still cannot afford to lie on our laurels. The challenges ahead are still great.  No doubt existing measures have proven to be successful in supporting prices, the Tripartite Cooperation nevertheless still have to strive hard towards long term  price stabilization at remunerative levels. The on going SMS is the Tripartite Cooperation main instrument in trying to achieve this, that is, the long term equilibrium between supply and demand. In this respect, continued support and collaboration with the ANRPC and its member countries are most welcomed.

Thank you.