Harimau Capital

PETALING JAYA: Plantation giant Kuala Lumpur Kepong Bhd (KLK) expects to see operations kick off for three new palm oil mills along with three new refineries in Indonesia this financial year.

“We will further commence work for one new mill in east and and another in central Kalimantan.

“Implementation of favourable value-added projects such as methane capture for energy and enhancing oil recovery using hexane and other solvents will also be continued,” said KLK chairman Raja Muhammad Alias in its annual report released last week.

The group said the construction of the three palm oil refineries, of which two are located in Sumatra and one in Belitung Island, has progressed well and were expected to be commissioned early to mid 2013.

He said given the prevailing uncertainties arising from the global economy shake-up, the group was cautiously optimistic of its performance for financial year 2013.

“We remain fundamentally confident on the account of projected double-digit growth in fresh fruit bunches (FFB) production on expectation of recovering FFB yields, increases in oil palm mature areas in Indonesia and improvements in our oil extraction rate (OER),” he said.

The group was also committed to its new planting programme in Indonesia, as well as numerous major capital expenditure projects for both the plantations and oleochemical business, he said.

“The projected expenditure of about RM1.3bil should augur well to the sustainability and long-term growth of the group,” he said.

He said the Malaysian government's lauded move to introduce a new export tax schedule for palm products to be implemented in 2013 looks to level the playing field and ease the pressure of stockpile.

“We believe palm oil, as a food item, will be able to demonstrate some degree of resilience to weather the choppy period.”

Chief executive officer Tan Sri Lee Oi Hian said the group embarked on a series of capacity expansion projects in 2012, with earlier announced projects expected to come on-stream in stages in 2013 namely in the fatty acids, fatty alcohols and fatty esters business.

“The immediate challenge for the group is to ensure timely commissioning of those plants for commercial production as per plan whilst for the business, to expedite the sales realisation of these new capacities,” he said.

He expects that in the next two years, a substantial quantity of fatty acids would come on-stream throughout the world, especially in Indonesia.

“This will include our 165,000 tonnes in PT KLK Dumai and 100,000 mt from KLK Emmerich, Germany coming up in the new year,” he said.

He said similarly for fatty alcohol, total world capacity would be increased and this includes 80,000 tonnes from KLK Oleomas.

“The worldwide overcapacity for merchant market fatty acids and fatty alcohol is estimated to be 40% and 30% respectively.

“We acknowledge that this could put more pressure into the already over-built capacity market, however, it would offer us greater flexibility in production planning to meet customer requirements,” he said.

As such, he said the emphasis for the group is to continuously drive for further cost efficiency and value chain addition as well as improving logistics support worldwide, in the group's efforts to optimise capacity utilisation.

“In China, we will carry on our volume push strategy, at the same time focus on improving operational efficiencies whilst developing more direct and key accounts,”he said.

The Star Biz Wed 02-01-13

KUALA LUMPUR: Industry experts have different price forecasts for crude palm oil (CPO) this year, but they all seem to agree that 2012 will be a better year for the commodity than the past two years. Their forecast average prices range from RM3,100 to RM3,610 per tonne. In comparison, CPO was traded at an average of RM3,210 in 2011 and RM2,701 in 2010. ISTA Mielke GmBH (Oil World) executive director Thomas Mielke said CPO prices would average about RM3,450 per tonne, given that the outlook for palm oil output was going to be moderate this year.

“We expect Malaysia will increase its CPO output by only about 0.4 million tonnes to 19.3 million tonnes, while Indonesia is expected to slow its output by 1.6 million tonnes or less, to 25.5 million tonnes,” he said yesterday during the palm oil price outlook session at the Palm & Lauric Oils Conference & Exhibition Price Outlook 2012 with the theme Global Shocks Local Impact. Mistry expects the price of CPO to hover at between RM3,450 and RM3,600 after June.

Another speaker at the conference, Malaysian Palm Oil Board (MPOB) senior research officer Ramli Abdullah, expects CPO prices to range from RM3,100 to RM3,610 per tonne. He said the prices were usually influenced by economic factors such as soybean oil prices, production and crude palm oil. “The production of palm oil for Malaysia is expected to increase to 19.36 million tonnes this year under normal weather situation and increase in new plantings, matured area and replanting,” he added.

 LMC International chairman Dr James Fry said he forecast Malaysia's CPO production to be unchanged from the 2011 total at 18.9 million tonnes and forecast CPO price to be at an average of RM3,250 per tonnes if Brent crude oil trades at US$125 (RM375) per barrel. Rabobank International Asia Head of Food & Agribusiness Research & Advisory John Baker forecast Malaysia's CPO production this year to be 19.2 million tonnes, while price was expected to peak to near RM3,500 per tonne before starting to moderate after the second half of 2012.

Godrej International Ltd director Dorab Mistry believes that Malaysia's CPO production this year would be at the range of between 18.6 million tonnes and 19 million tonnes. “I'm expecting a flat production for Malaysia this year as a result of a low cycle for palm trees,” he said. Malaysia's CPO production in 2011 was 18.9 million tonnes. He expects the price of CPO to hover at between RM3,450 and RM3,600 per tonne after June and that it would decline only after evidence of the low cycle end around November. Touching on the export taxes by the Indonesia, he said Malaysia had effectively asked its refiners to fend for themselves. “Malaysia can opt to adopt a carbon copy of Indonesia's export tax regime and do away completely with the duty-free export quota for CPO. As they say, if you cannot beat them, you join them!” he said. It was reported that Indonesia had last year cut export taxes on refined grades that helped its domestic processors restart their factories and offer discounts to overseas buyers. That turned margins negative for refiners in Malaysia and the Government was looking at ways to keep investments flowing into its RM60bil sector. Malaysia usually charges a high duty on crude palm oil shipments to protect its domestic refining industry. It does not impose any export taxes on processed palm oil. The country has 51 refineries with a combined yearly capacity of 22.9 million tonnes. It is planning new capacity of 9.6 million tonnes 

3-Mar-12 The Star Biz

對許多行外人來說，油脂化學（Oleochemical）是個陌生的名詞；但這個化學原料不但與我們的生活息息相關，大馬股市里更有許多公司，是靠這個行業吃糊。掌握和瞭解油脂化學，對投資亦有幫助。

森那美（SIME，4197，主板貿服股）旗下子公司--Emery油脂化學公司在去年杪，特地為媒體主辦了一場油脂化學的入門講座。我們在這里要用最簡單易明的字眼，讓讀者們清楚瞭解什麼是油脂化學。

油脂化學無處不在
隨著業者們開始使用棕油作為油脂化學的原料，以確保可以長期有持續性供應。油脂化學領域已經迎來更亮麗的未來。考慮到行外人對油脂化學的認識有限，做為這領域的巨頭，Emery油脂化學首創先河，於去年12月在孟沙舉辦一場半天的行業培訓課程，希望透過國內媒體，讓市場更瞭解這領域。

除了讓媒體更瞭解油脂化學和功能，該公司也展示許多由油脂化學製成的日常用品。這些都是我們的生活必需品，但卻沒有想過它們的原料是來自何處。 從洗髮露、肥皂、牙膏、清潔劑、塑料、到白色家電等一系列家庭產品，都需要用上油脂化學作原料。

更讓人預想不到的是，就連撲克牌上的塗層和墨水，源頭竟然也是回到棕油和椰油。Emery油脂化學把自己形容為晶片業里的英特爾（Intel），但永遠都是屈居幕後不為人知。 世上首個商業化生產的油脂化學產品，原來是蠟燭。由美國辛辛那提貴族--Emery家族在1840年所製造的首根蠟燭，目前依然擺設在Emery油脂化學位於莎阿南Peremba Square的總部。

在油基產品當中，有個多功能的化學原料稱作甘油，帶甜而沒有顏色，可用來製造牙膏、咳藥水、漱口水等。 由脂肪酸和脂肪酯合成的脂肪醇，則可用作護膚霜和護膚膏的原料，還可以用來製造肥皂或沐浴露的泡沫。

大馬產量世界之最
大馬是全世界最大的油脂化學生產國，種植巨頭如IOI集團（IOICORP，1961，主板種植股）和吉隆甲洞（KLK，2445，主板種植股）都有自己的油脂化學業務。調查機構弗若斯特沙利文（Frost & Sullivan）在2010年的數據顯示，大馬油脂化學產量冠全球，占世界產量1/4，或26%比重。接著下來的是中國、歐洲、美國、印尼、印度、日 本，產量貢獻比重分別是21%、18%、13%、8%、8%、3%，而其他國家則佔其余3%。

值得注意的是，大馬產量多達七成是出口到國外的，但中國產量卻是100%內部消費，反映出油脂化學替我國賺取不少外匯。

百年企業設足全球三大洲
Emery油脂化學是森那美種植和泰國化學國際私人有限公司（PTT Chemical International），各持50%股權的聯營公司。森那美在2008年收購Emery油脂化學，並在一年後與泰國化學國際聯營。
Emery油脂化學是全世界最大的天然化學生產商之一，其總部設在莎阿南。該公司的生產線已經跨越三大區域，分別是在德國北威邦的杜塞道夫、美國俄亥俄州的辛辛那提、及雪州的直落（Telok Panglima Garang）。

由於行業前景還有許多挑戰，Emery油脂化學投資2億美元，用來擴充直落產能，料在今年首季正式投入運作。另外，該公司也在德國洛斯德（Loxstedt）、東京、多倫多、上海、南安普頓、首爾、香港屯門，設有銷售服務中心或倉庫。Emery油脂化學的產品多是使用可再生原料，如椰油以及棕油等。

下個全球大趨勢
雖然說全球未來5大趨勢，分別是人口老化（截至2050年，世界人口將暴漲至90億人，其中20億人已經超過60歲）、全球化、都市化、能源需求和環境保護意識提高、保健與營養意識提升。
可是，Emery油脂化學看到的另一個趨勢，是油脂化學的崛起，而且這個大趨勢正好發生在大馬。因此，東南亞國家即將成為、甚至已經成為油脂化學世界的核心基地。

Emery油脂化學的泰國籍董事魯吉（Ruj Purnariksha）指出，油脂化學的消費每年成長4%至5%，表現跑贏大部份先進國的經濟成長。不但如此，世界油脂化學消費的年複合成長率（CAGR）成長預測也達4%，足以顯示這商品的需求是持續性的。

油脂化學主要來自植物油（vegetable oil）和動物油（animal fat）。在Emery油脂化學，植物油和牛脂各佔原料的50%比重。 無論如何，其本地生產線是近乎100%使用植物原料，而美國生產線是100%使用牛脂。這主要是考慮到大馬更容易獲得棕油，美國則較容易在公開的商品市場上買進牛脂。歐洲生產線因處於美國和大馬之間，植物油和牛脂各佔原料比重50%。展望未來，油脂化學的成長焦點料以植物油（包括棕油）原料為主。Emery油脂化學將繼續依賴國內最大的兩家種植業集團--聯邦土地發展局控股（Felda Holdings）和森那美，向該公司提供足夠的原料。

可與石油化學共存
許多人認為，油脂化學崛起後，有朝一日將會取代石油化學。儘管如此，Emery油脂化學的卡馬爾並不認同。「卡車可以取代汽車嗎？當然不能。就好像油脂化學和石油化學，他們都有各自獨特的功能，儘管部份功能是重疊的。」卡馬爾也表示，油脂化學對環境生態是友好的。從採用原料的第一步，Emery油脂化學都沒有作任何加工，所有產品都是100%天然的。除了環保和再生使用，其產品亦會通過生物分解。更為重要的是，油脂化學是無毒的，用來製造食品和化妝產品再適合不過。

他笑說：「我們不是在為您解決問題，而只是在協助您創造更美好的生活。」據瞭解，許多石油化學產品都開始用上油脂化學作部份原料，但油脂化學還是無法完全取代石油化學。普遍而言，石油化學產品的原料有九成是石油化學，只有一成是油脂化學。

吉隆坡甲洞（KLK,2445,主板種植組）集團在2011財政年取得突破性的業績，其核心種植業及油脂化學業務在營收及稅前盈利方面皆恢復歷史新高，主要拜強勢的原產品價格，尤其是強勁的原棕油及橡膠價格所賜，這些原產品在低迷的全球經濟環境依然強韌。原產品市場也獲得中國、印度及其他亞洲國家的殷切需求支撐。

在2011財政年，集團凈利達15億7千萬令吉，比前一財政年激漲55.2%，符合市場預測，儘管全球主要經濟在2011下半年放緩，但原產品價格依然企穩。盈利的劇漲，歸功於脫售兩家聯號公司的股權所取得的2億4千400萬令吉非經常賺益。

基於需要平衡發放給股東的合理回酬及確定公司成長的資本開銷融資，董事部推薦每股70仙的最終股息，加上較早派發的中期股息達15仙，總派發額為9億零520萬令吉，或占年度凈利的57.6%，與往年的派發率不相上下。公司的凈負債處於合理的5.9%水平，足以融資未來可能出現的收購計劃。

●經濟展望
2008年全球金融風暴似乎還記憶猶新，正當大部份經濟學家對步履蹣跚，但成長復蘇卻是穩定的全球經濟愈加有信心之際，我們目前卻面對歐盟一些國家的主權債務危機問題，這些國家的債務占國內生產總值的比重已處於危險水平，所發售的債券之回酬率也是難以持續，加上投資者信心的潰跌，其可能違約的危險性是存在的，它所引發的連鎖效應對全球所有經濟體及原產品之貽害是難以想像的。
處於現有的環境，僥幸我們的原產品價格仍然處於合理的驕人水平。正當局勢處於詭異難測之際，集團以每公噸近3千令吉售出2012財政年的35%油棕產量。

●種植業
集團種植業仍然是集團業務的支柱，在檢討年份仍然綻放異彩，稅前盈利激揚77.2%。原棕油平均價格每公噸為2千958令吉，棕仁油每公噸為2千141令吉，儘管印尼實施較高的出口稅而出現重大折價，但此價格比去年仍然分別高出23.1%及65.8%。

此部門的盈利也獲得搶眼的橡膠價格，平均每公斤達14令吉零9仙的扶托。
集團鮮果串從318萬公噸增至329萬公噸，躍升約3.6%，主要因印尼的可收割新園丘增加。我們有信心現年的鮮果串成長將增長，因可收割的面積擴大及種植材料素質改善。

儘管勞力緊縮及印尼棉蘭聯營計劃的沖稀效應，集團的每公頃鮮果串收成達22.17公噸，比去年稍微下滑。搾油率亦稍微改善至21.44%，這是我們需要繼續改善的領域。在此財政年，配合新的稅務架構，集團在印尼建竣3間新的棕油廠及3間原棕油提煉廠。再者，我們通過增值項目，如收集沼氣供能源用途及利用己烷增強棕油搾取也在實行當中。

●製造業
吉隆坡甲洞油脂（KLK OLEO）是集團的油脂化學臂膀，其稅前盈利達2億3千970萬令吉，比去年增長30.9%。基於全球陰晴不定的陰霾持續籠罩買氣，吉隆坡甲洞油脂從額外的產能及脂肪酸、脂肪醇及酯類業務銷售的回轉中獲利。

吉隆坡甲洞油脂當前的重心，是通過數項擴充計劃整合及改善其現有業務，包括大馬及海外，進而提高集團的油脂化學產能。儘管面對全球經濟的不明朗化，吉隆坡甲洞油脂繼續優化其綜合價值鏈及提昇成本效率。
其他製造業則因達不到經濟效益而繼續蒙虧。

●產業
DESA COALFIELDS發展已在去年完成。展望未來，集團的產業發展活動將集中於“BANDAR SRI COALFIELDS”，這是在雙溪毛糯面積達1千英畝的城鎮發展。配合政府呼吁發展商推出能力可及的房屋計劃，以迎合首次購屋者的需求，“BANDAR SRI COALFIELDS”推出30萬8千令吉起的房屋，此項發展至今的反應熱烈。

●零售
CRABTREE&EVELYN集團的美國業務重組已在2010年完成，為零售業的未來成長奠定穩固基礎。儘管需求疲弱，此部門業務仍然有利可圖，尤其是歐美占零售銷售逾半。無論如何，業務創新的重整已成功，系列新產品已推出，亞洲的成長火紅，在新市場如中國及印度存有商機。

●策略展望
基於原產品市場的不明確，加上歐債危機的效應，集團2012財政年的盈利難以估計。無論如何，在鮮果串收成預計回漲及可收割園丘增加前提下，我們對搾油率改善及鮮果串產量取得雙位數成長的預測保持基本面樂觀。

我們也承諾在印尼展開新的種植計劃及展開數項重大的資本開銷項目，總值超過10億令吉，對集團的長遠成長及健全有利。在通壓漲升下，預料現有全球經濟的不明朗時期會延續，我們也採取成本急速增長的調控行動。成本的挺漲如員工薪資上漲無可避免，惟生產力賺益作出平衡，因此，我們將繼續鎖定搾油率及勞力生產力的提昇。
與此同時，我們相信吉隆坡甲洞也會善加把握商機，以創造及提昇股東價值。
（星洲日報／財經）

（吉隆坡3日訊）今年種植領域獲得5大利好因素支撐，使分析員將種植領域評級調升至中和，預料2012年原棕油平均價格維持每公吨3千令吉水平，惟去年2月創下的3千800令吉高峰，將難以突破。肯納格研究指出，上述5大利好包括棕油產量看跌、亞洲原棕油市場需求穩健、原棕油庫存及使用比例緊縮、大豆油價格高企，以及拉尼娜氣候可能延長等，將為2012年的原棕油價格提供支撐。

去年全球原棕油產量增9.4% 今年料放緩至4.2%
2011年全球原棕油產量按年強勁成長9.4%之後，預料2012年成長率將放緩至4.2%，這主要是經過一年強勁成長，油棕樹在接下來的一年裡需要“休息”，料使今年產量成長放緩到210萬公吨至5千230萬公吨。世界食油雜誌預測，今年印尼原棕油產量按年成長增至6.3%，反觀大馬則僅1.5%。

肯納格指出，過去10個月裡（2011年3月至2011年12月），大馬的鮮果串回酬复甦出奇強勁，使原棕油產量增長介於2%至26%之間。過去10年紀錄顯示，原棕油按年成長僅能持續7至13個月。因此，假設這次的成長週期達到最長的13個月，預料原棕油產量下跌週期將從2012年4月開始。估計2011年10月至2012年9月間的全球原棕油消費量按年增長6.3%或300萬公吨，至5千120萬公吨水平。若氣候沒有出現明顯變化，5千150萬公吨的原棕油供應將足夠應付需求。

2012年的原棕油價格料可在2千800令吉水平獲支撐，不過，將不太可能突破2011年2月份創下的3千800令吉高峰。2011年，印尼原棕油消費量達到609萬公吨，超越中國的606萬公吨。預料此趨勢將延續至2012年，因印尼原棕油按年使用量料可成長12.5%，為亞洲之最，比較中國市場成長為9.3%，以及印度成長則為4.4%。
這主要是印尼2億4千萬人口對食品需求有增無減，以及主要是供出口的生物柴油生產的需求。

在2011年10月至2012年9月期間，預料全球的原棕油庫存對使用比例將下跌15.7%，主要是6.3%的需求成長，超越供應成長4.2%。世界食油雜誌資料顯示，原棕油的2011年第三季及2011年第四季的消費量分別達到1千270萬公吨及1千280萬公吨，按年成長率為8.2%，特別是大豆油及菜子油的供應短缺所致。阿根廷及巴西氣候亁旱，使本季的大豆收成情況不明朗，它們佔全球大豆油出口的69%，使大豆油價格獲得支撐。由於原棕油被視為大豆油替代品，一旦南美洲大豆歉收，預料原棕油的價格也會隨著走高。

今年1月的南美洲雨量已降至平均水平，並且僅有特定地區下雨。這使世界食油雜誌將阿根廷的大豆供應削減200萬公吨，至4千650萬公吨，以及巴西的供應也減少200萬公吨至7千萬公吨，它可能會在今年2月份的期刊進一步削減供應量預測，這有助間接支撐原棕油價格。拉尼娜氣候轉弱，不過，時間卻延長。美國氣象預測中心預料拉尼娜將持續至2012年春天或是2012年第二季。一旦拉尼娜氣候延長，預料過量雨水將減少大馬及印尼的鮮果串產量，從而推高原棕油價格。
森那美成首選


肯納格維持種植領域“中和”評級，在棕油價適度成長之際，看好棕油串成長表現亮眼的公司，以及業務成長主要來自非種植業務的公司。肯納格的大資本種植股首選為森那美（SIME，4197，主板貿服組），評級從“市場表現”調升至“超越市場”，目標價10令吉85仙。IOI集團（IOICORP，1961，主板種植組）則升至“市場表現”評級，目標價5令吉55仙。

中資本種植股首選為大安控股（TAANN，5012，主板工業產品組），特別是其2012年財政年的鮮果串產量成長達到30%標青表現，獲得“超越市場”評級，目標價7令吉90仙。怡保種植（IJMPLNT，2216，主板種植組）獲得“市場表現”評級，目標價3令吉25仙。吉隆坡甲洞（KLK，2445，主板種植組）則是“落後大市”評級，目標價21令吉50仙；雲頂種植（GENP，2291，主板種植組）也是落在“落後大市”評級，目標價8令吉75仙。
（星洲日報／財經

JAKARTA, Feb 2 — Indonesia’s government plans to create one of the world’s largest palm oil and rubber firms in March by combining state planters with total assets of US$5.6 billion (RM16.91 billion), a government minister told Reuters today.

A planned listing of the firm will tap investor interest in a country with a recently acquired “investment grade” rating and create a rival to top regional planters such as Malaysia‘s Sime Darby and Singapore‘s Wilmar.
The government will consolidate the assets of 15 state firms, whose revenues last year stood at around 40 trillion rupiah (US$4.45 billion), under parent company PT Perkebunan Nusantara III.

“This holding will become one of the largest plantation firms in the world with one million hectares of palm oil and rubber,” State Enterprises Minister Dahlan Iskan said in an interview.

The sprawling archipelago of 17,000 islands is the world’s biggest exporter of palm oil, second biggest producer of rubber and robusta coffee and third biggest producer of cocoa. The state firms produce all these commodities as well as tea, rice, cassava and sugar.

Analysts said the consolidation of the state firms would produce some economies of scale but would not have a dramatic impact on commodity supply.

“They have been producing. It is not new supply coming into the market. This is just a rationalisation of government linked assets,” said Carey Wong, an analyst with OCBC Bank in Singapore.
The last mega-plantation merger was in 2008 when Malaysia’s government pushed for the tie-up of three state-linked planters to form Sime Darby, which it touted as the largest plantation firm by assets.

Borneo rice bowl
Indonesian state plantation firms will combine to produce an extra 500,000 tonnes of rice from planting 100,000 hectares of new paddy fields in east Kalimantan on Borneo island, Iskan said, without giving a timeframe for the production.
Indonesia, the world’s fourth largest country by population, is trying to become self-sufficient in production of its staple grain. But it surprised regional markets last year with hefty imports from Thailand and Vietnam. Expanding paddies could help its aim not to import again this year.

“I expect Indonesia could produce an additional 280,000-300,000 tonnes of paddy from the newly planted areas of 100,000 hectares,” said Chookiat Ophaswongse, the honorary president of the Thai Rice Exporters Association.

Plantation firms have been restricted this year from expanding in forested areas such as Borneo by Indonesia‘s two-year moratorium on new forest clearance and land acquisition is in any case seen as a hurdle in a country known for red tape.

Indonesia in December passed a land bill designed to speed up land acquisition for state projects deemed in the public interest and the law could enable the new firm to get access to land for rice.

Top landbank
Iskan said the combined profits of the firms to be amalgamated were around 3.6 trillion rupiah. The government plans to first list one of the firms, PT Perkebunan Nusantara VII, as a unit of the holding firm this year on Jakarta‘s stock exchange.

“After PTPN VII, we’re open for other units to list on the stock exchange but eventually we will list the parent company and I don’t think we should retain a majority stake once it is listed,” Iskan said.
The combined palm oil and rubber landbank of the holding company Perkebunan Nusantara III will be bigger than that of the main existing listed regional planters. Sime Darby currently tops the list with 525,795 hectares for palm oil and has a market value of US$18.2 billion.

Analysts said the new Indonesian merger’s hefty landbank would pull in investors.
“It is massive. They are talking about a million hectares. That would be massive. I’m sure the stock market will be very excited,” said John Rachmat, a palm oil analyst at the Royal Bank of Scotland in Singapore. — Reuters

 THE Thai government approved yesterday a 15 billion baht (RM1.48 billion) budget plan to prop up rubber prices, but the impact of the farmer-friendly intervention is likely to be shortlived because of weak demand.

The government agreed to buy unsmoked rubber sheet (USS3) from farmers at 120 baht per kg, up from the market price of 90 baht at the end of 2011, a senior Agriculture Ministry official said.

Prices immediately moved higher although some traders wondered how long that would last, given that demand is usually low at this time of the year and may remain weak in the next few months because of the slowdown in the global economy.

China is the world's largest rubber consumer, and there are fears that the debt crisis in Europe could crimp demand for tyres. "The intervention programme can start right away and we are looking to buy 200,000 tonnes or more to shore up prices," Apichart Jongsakul, head of the Office of Agriculture Economy, said.

The price of benchmark export-grade smoked rubber sheet (RSS3) halved from a record high of US$6.40 (RM1.90) per kg in February 2011, hitting a low of around US$3.40 this month. That has dragged down the price of unsmoked sheet, which farmers sell to rubber factories, and farmers have staged protests to demand the government intervene.

Unsmoked sheet was quoted at 110 baht per kg yesterday. RSS3 was offered at US$4.00 per kg, having risen recently in anticipation of the intervention scheme and because of limited supply, with many operators in the main producing countries, Thailand, Indonesia and Malaysia, on Lunar New Year holidays.

The benchmark Tocom rubber contract for June delivery, which sets the global trend, jumped more than 3 per cent to 315.3 yen per kg, around a three-month high. Tocom has risen around 15 per cent since January 11, when the government and farmers said they had agreed on an intervention plan.

Thailand, the world's biggest rubber producer and exporter, produces around 3.0-3.2 million tonnes of rubber a year, so the 200,000 tonnes represents about 6.5 per cent of output. It exports around 2.8 million tonnes a year, around 36 per cent of the global rubber trade, according to the Association of Natural Rubber Producing Countries (ANRPC), which groups countries accounting 92 per cent of world output and exports.

Supply starts to tighten in Thailand at this time of year, with the dry season approaching, and traders said prices could rise later this week when the Lunar New Year holidays end.

But the medium-term trend was unclear, given Europe's debt crisis and the gloomy world economic outlook. Kazuhiko Saito, chief commodities analyst at trading house Fujitomi in Tokyo, said Tocom traders would be cautious. "The last-minute buying here was helped by the news," Saito said.

"But the mood in general is 'Let's sell on the fact', as they have bought in advance." "We're now looking to see if Chinese buying resumes after their New Year and how supply is affected during the wintering period," he added.

There were also question marks over the capacity of the Thai government to intervene. It would need some 24 billion baht, around US$763 million, if it wanted to buy 200,000 tonnes of rubber at 120 baht per kg, well above the 15 billion baht approved. In addition to its rubber intervention, the government is committed to buying rice at a price way above market rates, at a cost of up to 50 billion baht. It also needs to find up to 350 billion baht for a series of water management and flood prevention schemes after devastating floods last year.

The government's total budget deficit in the year to September 30 was originally planned to be 350 billion baht, increased to 400 billion after the floods. Asked about funding for the rubber scheme, Apichart said: "The fund would be a soft loan from a state-owned bank to be paid to rubber cooperatives across the country to buy rubber and keep in stocks."

Pongsak Kerdwongbundit, president of the Thai Rubber Association, was confident the government's plan would keep export-grade RSS3 above US$4 per kg but would not say whether he though the price could go back towards the record of US$6.40.

Edy Irwansyah, executive secretary of the North Sumatra branch of the Indonesian Rubber Association (Gapkindo), said prices were unlikely to stay high for very long as demand was poor.

"At a time when rubber production in Southeast Asia is falling because of wintering, the intervention by the Thai government will definitely push up prices in the international market. But the impact will be short-lived because buying interest during this period is also low," he said. Reuters

Published: 2012/01/25 Business Times

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