Sicom sets up arbitration scheme to help traders hit by defaults

Singapore -- Following the collapse in the price of natural rubber,

Sicom, Tocom and other markets have been hit by a wave of buyers who

bought physical rubber who are not fulfilling their obligations.

Jeffrey Tan, senior director for business development and clearing at

Sicom saidno-one knows how big the problem is; how much rubber is

onvolved, or the value of the contracts.

Traders who acted on behalf of customers are reluctant, he said, to reveal all their losses.

Tan said Sicom is putting in place an arbitration scheme which allows traders and their customers to negtotiate a settlement.

He

said that many Chinese factories had been set up iin the last five

years or so to make tyres and other goods. The directors of these

factories had bought rubber for physical delivery at high prices before

the price crash last year. Now that the price has fallen, they want to

renegotiate the prices, or simply fail to take delivery of the rubber.

One

observer noted that Hong Kong harbour is full of ships carrying rubber,

for which no-one will take delivery. Another observer, speaking off the

record, suggested there might be as much as 200 000 tonnes of rubber

affected by this crisis, which translates to contracts worth over $500

million at the purchase price.