Mechanism set up to keep rubber prices in check
Mechanism set up to keep rubber prices in check
The Association of Natural Rubber Producing Countries (ANRPC) has been developing a Sustainable Price Mechanism (SPM) to ensure the viability of natural rubber supply chains.
As a member of ANRPC, the Vietnam Rubber Association gathered feedback from rubber stakeholders on the proposed system between March 7 and April 6.
Under the mechanism, the prices of TSR 20 rubber delivered under free-on-board terms are used as a benchmark for SPM prices.
The differences between SPM ceiling and floor prices are set at US$1.3 per kilo. Rubber batches outside the price range will be subject to penalties and not given export approval.
Initially, ANRPC suggested TSR 20 lower prices at $2.2 per kilo and upper prices at $3.5 per kilo.
By observing rubber future contracts at the Singapore Exchange from July 1997 to December 2020, the association reported that TSR 20 prices fluctuated within the sustainable price band for only 56 months. The prices fell short of the lower limit most of the time (187 months) and surpassed the upper limit in 39 months.
ANRPC also reported that the world's demand for rubber has been soaring since the pandemic began, pushing up prices.
By late March, rubber prices had risen on various commodity exchanges, including the Osaka Exchange and the Shanghai Futures Exchange.
The mechanism is expected to effectively safeguard the interests of all actors in rubber supply chains, including farmers, factory owners and buyers, and improve market liquidity amid rising rubber prices.
Viet Nam exported 1.93 million tonnes of rubber in 2021, raking in $3.24 billion. While export volume increased by 11.7 per cent against the previous year, export value rose by up to 36.2 per cent, thanks to higher prices.
