Asian rubber markets go into hibernation
Asian rubber markets go into hibernation
SINGAPORE (Reuter): Regional rubber markets began hibernating yesterday ahead of next week's Lunar New Year holidays and traders said production stoppages and current wintering could keep prices steady to slightly up.
But the longer-term trend could be clouded by a higher post- wintering harvest, ample origin stocks and weakening consumer demand, they said.
"Activity is virtually at a standstill from this week. I don't see much major price movements," one Singapore dealer said.
"Prices will remain steady to slightly higher until after the holidays because of loss of production days and wintering," he said. But the market could see some downward pressure once tappers return from the holidays.
Trading in Indonesia, Malaysia, Singapore and Thailand resumes on Feb. 26. The markets in Indonesia, Malaysia and Singapore will also be shut for the Moslem holiday marking the end of Ramadhan, which this year coincides with Chinese New Year.
Traders said they had heard the Thai and Chinese governments had agreed in principle on a new long-term rubber purchase deal, but that the pact lacked specifics, such as contract volume and prices.
"Thailand agreed to sell and China agreed to buy rubber but there was no mention of volume and other details," a Singapore dealer said. "Probably, they don't want to put anything in stone any more."
In recent years, Thailand faced difficulties in meeting its supply commitments to China. That meant it sometimes had to incur heavy losses by buying expensive rubber in the open market and selling it to China at lower prices.
Traders said this year's wintering -- the seasonal phenomenon when trees shed leaves and production declines -- began earlier than usual in Malaysia and Thailand.
Traders said the wintering, expected to be brief and mild, could be followed by a secondary leaf fall in April.
Thai traders said wintering and fresh Japanese orders kept local prices firm last week, with benchmark March RSS3 rising to 153 U.S. cents a kg from 150 a week earlier.
"The firmer price is due to perceived tight supply here. And despite the approaching Lunar New Year, we received some orders from Japan," a trader at Teck Bee Hang Co Ltd said.
Another trader said wintering was sweeping most rubber growing areas in the south, but said it should be over by early March.
In Indonesia, traders said the market was depressed by poor buying interest by the major buyer, the United States.
"Demand from the United States is likely to remain weak despite an expected sufficient supply of rubber," one dealer in Medan said.
SIR20 was likely to hover at 64.50-66 U.S. cents a lb this week in Medan and other major Indonesian ports, dealers said.