Asia's rubber trade seen to be at standstill
Asia's rubber trade seen to be at standstill
SINGAPORE (Reuters): Asia's rubber trade is likely to maintain
its rangebound state this week, with the political situation in
Indonesia and the performance of regional currencies the main
factors for business, traders said yesterday.
"The market has been very quiet in the past one-and-a-half
weeks. There are too many uncertainties in this region (which
are) keeping players largely on the sidelines," said one dealer
at a commodity house in Singapore.
Regional traders were not upbeat over the gains posted by
rubber exchanges in Japan last Friday, which rose on the back of
the U.S. dollar's rise against the yen and hopes the spot
February contract will expire on Monday at relatively high
levels.
"Demand is still looking pretty quiet in the coming week,
but...not if there is a dramatic change in Asian currencies or
Indonesia," the dealer added.
Indonesia, the world's second largest rubber producer after
Thailand, is battling its worst financial crisis in decades.
A sharp plunge in the Indonesian rupiah has increased prices,
hammered companies with heavy foreign debt obligations and raised
fears of mass unemployment.
Riots have rocked several Indonesian towns, although traders
said rubber trading has not been affected so far. Indonesia's
1996 rubber output stood at 1.54 million tons, of which 90
percent was exported.
"I"m not very optimistic this year," A.F.S. Budiman, executive
director of the Rubber Association of Indonesia, told Reuters
last week. "Consumers have been buying because of fears over what
might happen in Indonesia."
But regional traders said the situation in Indonesia appears
to be calming down and was looking "better and more positive."
"Prices are holding as it seems things are stabilizing, but
demand is still pretty weak across the region," said another
Singapore-based trader.
`Indonesian traders said prices for the tire-grade SIR20 were
likely to stay at the same level this week.
"The market is very, very quiet because demand is poor.
Traders are predicting this trend to continue this week because
buyers have built up stocks," said one trader in Jakarta.
Traders said that most players were looking for fresh leads,
adding that the rupiah's movement remained the important issue in
the Indonesian rubber market.
Thai traders, taking a wait-and-see attitude, were nervous
about speculation in the Tokyo rubber futures market.
Thailand is the world's biggest producer of natural rubber.
"The speculation confused the market and we cannot forecast
which way prices will go. So it is better for us to wait and
see," a Bangkok-based trader said.
The market this week may be inactive as buyers felt it was too
risky to take long positions immediately, especially in nearby
months, Thai traders said.
"However RSS 3 rubber for July/August delivery which is at 83
U.S. cent a kg is still too cheap. It should be around 85-86
cents," a dealer in the Thai rubber center of Hat Yai said.
In Malaysia, traders saw a directionless market.
"I think it'll still be currency play and the prices will
possibly move in a very tight range," one said.
Sellers adjusted their quotes through the whole of last week
just to keep trade moving, traders said.
"The market is still rather weak, although the fundamentals
look all right with the return of rains and the approach of
wintering," a dealer said in Kuala Lumpur.
In Indonesia, March/April tire-grade SIR20 was quoted at the
end of last week at 38.75 U.S. cents/lb FOB Medan, Palembang and
Surabaya.
The benchmark March RSS1 buyer was at 306 Malaysian cents a kg
at the close of trade on Friday, up 6.50 cents from the previous
week. March SMR20 was up a cent at 314 a kg.