Halcyon Agri complains of distortions in futures markets and aims to offer alternative

By Stefania Palma in Singapore

The world’s largest supply chain manager for natural rubber will launch a digital marketplace for the commodity to fight market dysfunction that has halved rubber prices in the past 18 months.

Halcyon Agri’s service, which will launch in 2019, will offer an alternative to futures markets, which now set global rubber prices that some traders view as distorted.

“I want to be the Amazon of rubber,” said Robert Meyer, chief executive at Halcyon Agri, which is 55 per cent owned by?Sinochem, the Chinese state-owned chemical and energy group. “Exactly what Amazon did to retail is what we are going to do to the traditional supply chain model of rubber.”

Singapore’s RSS3 futures, which are used to price most of the rubber consumed by the global tyre industry, have fallen by almost 10 per cent since the start of 2018. The recent sell-off in the oil market is partly to blame, as is excess supply of rubber. “There are too many trees that can be tapped,” said a Singapore-based rubber trader.

But Mr Meyer argues the “perceived over-supply” of a grade of rubber produced in China, which is not used by global tyremakers yet affects global prices because of its link to Chinese rubber futures — the most liquid in the world — is pulling down the benchmark Singapore futures contract.

China’s natural rubber stocks have jumped 40 per cent year on year to a record 547,000 tonnes.

It proposes to fix futures market dysfunctionality by setting up a platform where producers and consumers can set rubber prices bilaterally, bypassing the public market.

“You and I then have a bespoke conversation about price and volumes, what you need and what I have, every day,” said Mr Meyer.

The new service will provide a market for sustainability-controlled rubber, and will extend financing services to rubber farmers via an external partner that remains undisclosed.

It would take time for participants to join Halcyon Agri’s market, said Warren Patterson, commodity strategist at ING. “Even if you look at the launch of futures contracts, it can take years before it becomes a real liquid market so I don’t see this being any different.”

Singapore-based rubber trader added that a platform such as Halcyon Agri’s was not enough to resolve global oversupply driving the sector’s weakness. He added that market participants were likely to favour public futures markets — a more “efficient” representation of global rubber supply and demand — over private pricing services.

Singapore-listed Halcyon Agri was also looking to list one of its subsidiaries in London in the next year, pending board and shareholder approval.

The listing of the unit, which had plantations in Cameroon, would find strong demand in the UK, said Mr Meyer, where investors tend to be more familiar with African assets and plantation companies, which take a while for revenue and profit to flow.

He added that Singapore investors “tend to be a little more impatient”.

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