Asian rubber prices vulnerable to further fall

Asian rubber prices vulnerable to further fall

SINGAPORE (Reuter): Southeast Asian rubber prices, weighed down by rising supply from the post-wintering harvest, are vulnerable to further declines unless significant buying is tempted to emerge, traders said yesterday.

One trader at a Singapore house predicted at least a five percent retracement in prices from current levels by late May in the absence of bullish news and as rubber trees return to full production following the wintering period when latex flow slows.

Traders said although there could be some slight upward correction on bargain-hunting and short-covering, this was unlikely to alter the immediate negative trend.

Unseasonal rains in Indonesia may help halt sliding prices but they are unlikely to push them higher, they said.

Malaysian and Singaporean trade is expected to remain quiet in this holiday-shortened week. Both markets were lower yesterday, dragged down a sharp fall in Tokyo prices on the yen's surge against the dollar.

Thai rubber prices are also seen coming under pressure due to increased supplies, Japan's Golden Week holidays and the absence of Chinese demand.

The Singapore trader said: "I can't think of any bullish factors in the market. Consumers are very quiet with the holidays and most are fairly well-bought."

"One large rubber consumer has been buying heavily forward in the past few weeks and of course that has stopped.

"No one is complaining of a shortage of rubber. There could be a slight shortage in Medan due to wintering but this is being offset by good production from other areas in North Sumatra.

"Thai production is a bit better. Overall, I see another five percent drop in prices for the next three weeks," he said.

Indonesia

But traders in Indonesia said prices might be able to hold current levels helped by lower supply in some areas.

They said benchmark SIR20 rubber prices were likely to remain at between 58.00-58.25 U.S. cents/lb in Palembang, 58.25-58.75 cents in Medan, 58.00-58.25 in Pontianak and at 57.75-58.00 cents in Surabaya and Jambi.

But traders in Singapore valued the market lower at 57.50 cents in Belawan and 57-57.25 cents in Padang and Palembang.

Indonesian dealers said lower supply followed unexpected rains in Jambi and other key production areas.

"Rains continue falling almost day and night here confounding our previous expectation," one dealer in Jambi said.

The dealer said supply in Jambi was likely to fall to around 7,000 tons in May from between 8,000-9,000 tons in April.

European buyers are expected to remain active in the market for SIR20 grade, particularly in Palembang, albeit for small quantities, traders said.

The latex market is likely to stay quiet. Latex was last traded in the local market at Rp 2,550/kg. One latex dealer in Medan said he expected to ship some 1,000 tons of latex to Germany at US$1.15/kg in the next two months.

Malaysian dealers said only month-end short-covering might stave off falling rubber prices this week.

"Buying interest is rather poor for the moment, save for some hand-to-mouth needs," a dealer said. "If prices are to rebound, there's got to be some substantial buying," he added.

A major Thai exporter in Hatyai said: "More domestic supply will come in while the market remains quiet. Well stocked Japanese buyers can afford to stay out."

Thai benchmark RSS-3 for June/July shipment eased to $1.38-1/5 a kg FOB Bangkok on Friday from $1.40 a week ago.

"The Chinese only made inquiries without placing actual orders. Some Thai exporters are also wary of selling to them because of their uncertain payment records," a trader said.

Thai traders said the bulk of orders they received last week came from tire-maker Bridgestone, but they added that the orders were not substantial.