Currencies, Thai stocks to haunt rubber trade

Currencies, Thai stocks to haunt rubber trade

SINGAPORE (Reuter): The Southeast Asian rubber trade will languish this week under the double burden of falling regional currencies and the intimidating prospect that Bangkok may sell its excess rubber stocks, traders said yesterday.

"It will be a very uncertain market. People will be waiting for the decision on the Thai stocks and we also have to watch the currency markets very carefully," a veteran rubber dealer told Reuters.

Volatile financial markets have made rubber markets around the region jittery and trying to find a solid footing to trade in the difficult conditions, dealers said.

"It's going to be bearish again this week. Traders are busy calculating at how much they should offer rubber. The (Indonesian) rupiah's fluctuations are driving us crazy," said one trader in Jakarta.

The dealers said they were swamped trying to determine offer prices because of the rupiah's gyrations against the U.S. dollar. The Thai government is also scheduled to make a decision on Thursday on whether to sell an estimated 100,000 tons in excess stocks, adding to the market's uncertain mood.

"Everybody's waiting for the fourth of September," a trader in Singapore said. "People are very nervous about that."

Thai rubber dealers said business would remain quiet ahead of the decision by the National Rubber Policy Committee chaired by Deputy Prime Minister Sukavit Rangsitpol, which will decide on the proposal to sell rubber from the government stockpile.

Thai traders said the market expected the government would sell because it needs the money and to avoid any decay in the rubber stock.

"We have high expectations that the government would sell the rubber in its stockpile. But the key factor is at what price," a trader in Thailand said.

A government's sale of its stockpile would affect the market if its sale prices are much lower than market prices.

The benchmark Thai RSS3 rubber was quoted on Friday at about 93.00-96.00 U.S. cents/kg for October delivery against 90.00 cents from the previous week.

In Indonesia, dealers said the possibility of Thailand selling its stock meant they would have to make price adjustments of their own.

"The thing is that once Thailand sells the stocks at cheap prices, we will wait for one or two weeks before making a decision on whether we will need to sell as well or hold out. For sure, prices will be lower," one trader said.

"Buyers, on the other hand, will also wait and see whether Thailand actually sells its rubber," he added. "What we can do now is just wait and see how the market turns out."

Traders said offer prices were quoted at 41.75 U.S. cents/lb FOB Palembang for November shipment, 42.00 cents FOB Medan for September shipment, 41.75-42.00 cents FOB Surabaya, 41.50 cents FOB Padang and 41.25 cents FOB Pontianak and Jambi.

In Malaysia, dealers said prices may rebound this week if the ringgit remained weak against the U.S. dollar. But buying interest remained weak and the market was not likely see any substantial volume of business done, the dealers said.

"If the currency goes up, the prices should also go up, but I wonder what's the point?" said a dealer in Malaysia. "We're not going to see any interest from buyers...that's for certain."

Malaysia's benchmark September RSS1 buyer was quoted at 259 Malaysian cents a kg at the close of trade on Friday against 250 cents the previous week. September SMR 20 ended the week at 256 cents against 248.50.

An official of the Malaysian Rubber Exchange and Licensing Board said the rise was mainly ringgit-driven. "It's a currency- related price adjustment," the official said.

The ringgit fell to an all-time low of 2.9650 against the dollar during intra-day trading on Friday before recovering to 2.8960.