The world's three biggest rubber producers are on the brink of creating a "regional physical market" to improve trading and prices, Bloomberg reports.

Representatives from Malaysia, Thailand and Indonesia, who together account for 70 per cent of the world's rubber output, are meeting at a summit to discuss ways to stabilise prices.

Industry experts believe that the exclusive market could help with transparency around exports and generate more reliable prices.

The idea is particularly pertinent given the fact that rubber lost 33 per cent on the Tokyo Commodity Exchange in 2011 and could be further harmed by lack of demand for rubber products due to the European debt crisis, phuketwan.com speculates.

Tjahjono Budiarto Tjandra, chairman of the International Rubber Consortium Ltd said in an interview that the initiative was likely to involve the Malaysia Derivatives Exchange, the Agricultural Futures Exchange of Thailand and the Indonesia Commodity and Derivatives Exchange.

Of the last group, CEO Megain Widjaja has been quoted as stating "we're ready to state the rubber contract next year." However, it is widely acknowledged that the initiative would require support from the countries' respective governments.

"There's a desire from the governments of the three countries to set up a market as soon as possible that would be based on the real supply and demand fundamentals," Tjandra added.

Author : Elizabeth Smythe

12 December 2011