Hainan inks agreement to buy 208,000 tons of rubber from Thai stockpiles
China's Hainan Rubber Industry Group said it had signed an agreement to buy 208,000 tons of rubber from Thailand, allowing the world's top exporter of the commodity to unload stockpiles that have weighed on prices, Reuters reported over the weekend.
The stocks of rubber were bought by the government of former Prime Minister Yingluck Shinawatra, who was ousted in May, in a bid to support domestic prices and bolster farmers' incomes.
"The deal gets rid of the old stockpiles built up under Yingluck's government. Our new policy is we will only buy rubber if we already have orders to sell," a source from the Thai Ministry of Agriculture told Reuters, who declined to be named because he was not authorized to speak to the press.
Thailand's state-run Rubber Estate Organization (REO), which oversees the stockpiles, sold the rubber, including some top-grade 100 percent rubber priced at around $1,900 per ton, the source said, adding that lower-quality grades were sold for less.
Hainan said the purchases would be made at a "fair market price" but gave no further details in a filing to the Shanghai Stock Exchange dated November 25.
The Thai government offered 200,000 tons of rubber to Chinese companies earlier this month.
Thailand, also the world's biggest rubber producer, has been trying to reduce its stockpiles, which have been hanging over the market at a time when global prices are already depressed because of weak demand.
Traders said the price at which Hainan had agreed to purchase the cargoes could affect spot and futures prices, especially if it was confirmed it had won huge discounts.
A Tokyo-based trader said the Thai stockpiles could start rising again.
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