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.