Bears keep stranglehold on Southeast Asian trade

Bears keep stranglehold on Southeast Asian trade

SINGAPORE (Reuters): The Southeast Asian rubber trade remained mired in a ferocious bear market as poor consumer sentiment is seen driving prices lower this week, dealers said yesterday.

"It's extremely bearish," a senior European dealer said. "There's too much supply and stocks are everywhere. If you are a producer, these are not happy times."

Dealers in Thailand, the world's biggest producer of natural rubber, said the only buyers in the market were the Japanese.

Tire manufacturer Michelin was the only other buyer, picking up some rubber in small-lot routine buying, they said.

"There's hardly any buying interest. Some are calling up just to check on prices," said one Malaysian trader.

There was no sign of consumers returning to the market, although European buying was traditional before the year-end holidays, the trader said.

"Offtake from Europe and the United States is very poor. They have bought whatever they needed. China is also quiet and they're not in the market at all," a Japanese dealer in Singapore said.

"I think prices are going to fall again this week because of the slow demand," a trader in Indonesia added.

Another trader in Indonesia said: "I am pretty sure the trend will remain bearish throughout the rest of this year."

Malaysian dealers said that in the absence of new factors, the local market took its cue from the weakness seen in Tokyo. The lack of clear direction of the Malaysian ringgit against the U.S. dollar also limited activity, they said.

One dealer said he expected prices to fall another four to five Malaysian cents a kg this week.

"There (are) signs that supply is also picking up and this will add (to) pressure on prices," the trader said. "Weather conditions are ideal for rubber production," a dealer in Singapore said, adding ample supplies will continue to reach the market and put regional prices on the defensive.

The trade is also keeping an eye on whether Bangkok's new government will eliminate its rubber intervention scheme or sell part of its 110,000-ton buffer stock, which will further savage an already depressed market.

Thai dealers said there was no sign of the government in the market last week, which partly accounted for easier prices.

"We don't know whether their absence was a short-term hiccup due to a change in the government or whether the government has no money to do it anymore," a dealer in the Thai rubber center of Hat Yai said.

Bangkok has cut spending for fiscal 1997/98 (Oct/Sept) to meet IMF austerity targets. The price of Thailand's benchmark RSS3 for March shipment was quoted around 75.00 U.S. cents per kg FOB Bangkok.

In Indonesia, traders said offer prices were quoted at 39.50 cents FOB Palembang for February shipment. Offer prices for January shipment in Medan were quoted at 40.00 cents and at 38.75 cents FOB Surabaya for December shipment.

The Malaysian Rubber Exchange and Licensing Board quoted the key RSS1 at 277 Malaysian cents a kg for May buyer at the close of trade on Friday, down 10 cents from the previous week.

SMR 20 buyer was quoted at 277.50 cents a kg, against 285 the previous week.