Rubber Companies Take a Hit as Debt Crisis Threatens Demand

By webadmin on 10:23 pm Nov 10, 2011
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Jakarta Globe & Bloomberg

Shares of Indonesian rubber producers tumbled on concern that prices will decline further as weak European economic growth threatens to curtail global demand for the commodity.

Astra Agro Lestari, the nation’s biggest listed plantation company, dropped 3 percent to Rp 21,300.

Perusahaan Perkebunan London Sumatra Indonesia, the third largest, fell 3.3 percent to Rp 2,175. Jaya Agra Wattie lost 1.3 percent to Rp 385.

Futures in Tokyo have plunged 18 percent this month amid Europe’s sovereign-debt crisis and as flooding in Thailand continues to cut automobile output.

The April delivery contract on the Tokyo Commodity Exchange plunged 7.3 percent to close at 252.7 yen ($3.25) a kilogram.

Thailand, Indonesia and Malaysia, the largest rubber producers, are closely monitoring prices and will impose measures to stem a decline to an 18-month low, according to a producer group.

“The group is having an internal discussion to limit the price slump as demand-supply fundamentals remain unchanged,” said Yium Tavarolit, secretary of the International Rubber Consortium. Measures being discussed include delaying shipments, he said.

Global demand remains strong as natural-rubber imports by China surged 38 percent to 220,000 metric tons in October.

Production from the three major producers, which account for about 70 percent of global output, will decline during the low-production season starting in late January, Yium said in Bangkok.

Rubber accounted for 7.4 percent of total Indonesian exports in the January-September period, according to data from the Central Statistics Agency (BPS).

Europe faces the danger that it could tip back into recession over the course of 2012 due to a “vicious circle” of government debt, vulnerable banks and collapsed spending, the European Union’s economics chief, Olli Rehn, said on Thursday.

Additional reporting by Agence France-Presse