Japan dampens Asian rubber mart

Japan dampens Asian rubber mart

SINGAPORE (Reuters): Worries over post-election
Japan and continued weakness in regional currencies are set to
send more shivers through Southeast Asia's dull rubber market
this week, regional traders said yesterday.

"There has been very little physical trade recently. People
are only checking prices," said one Singapore trader.
"They may even stop asking if Japan's economic outlook remains so
bearish. There is no good news at all and most people are very
pessimistic," the trader said.

The dollar rose above 144 yen in early Tokyo trade on Monday
amid political uncertainty in Japan after the ruling Liberal
Democratic Party suffered a major setback in Upper House
elections.

Hopes that the International Natural Rubber Organization
(INRO) would buy up the market have faded with rubber prices
posting minor gains last week as regional currencies weakened
against the dollar, traders said.

"It's currency movements, not demand, that supported rubber
prices," another Singapore trader said.

INRO groups major rubber producers and consumers. Under INRO
rules, the buffer stock manager may buy rubber when the group's
five-day moving average price falls to 183 Malaysian/Singapore
cents a kg. He must buy at 172.

The average price was 190.54 cents on July 9, compared with
just above 183 in late June.

"It doesn't look like we will see the may-buy level soon,"
said the second trader.

In Thailand, prices ended a week slightly higher after the
Thai baht eased against the dollar.

China agreed to buy 5,000 tons of rubber from the Thai
government stockpile of around 50,000 tons at $632 per ton, and
traders saw some moderate demand.

However, news that Japan's May rubber output for tires dropped
by 2.4 percent year-on-year weighed on sentiment.

The Japan Automobile Tire Manufacturers' Association said on
Friday that the country's rubber output for tires totaled 84,427
tonnes in May, representing a 2.4-percent drop.

Output

In the first five months of this year, rubber output for tires
totaled 444,860 tonnes, down 1.2 percent from the corresponding
period a year ago.

In light of weak domestic demand, Japanese trading firms
continued to cut rubber imports.

"News from rubber output for tires and the bearish outlook of
local and regional automobile industry do not bode well for
market sentiment here," said a Hat Yai trader.

Thai RSS3 for October shipments was quoted at 73 U.S. cents
per kg on FOB basis at the end of last week. November and
December were quoted at 74 and 75 cents a kg respectively.

A weaker Malaysian ringgit also supported rubber levels, but
demand from overseas consumers remained poor, partly because of
cheaper rubber offered in Indonesia, traders said.

"The market has been driven by currency as there were no other
factors. I expect this to continue," said a local trader.

At the end of last week, the ringgit sank to a five-month low
of 4.2750 to the dollar against around 4.1400 a week earlier.
On Friday, the Malaysian Rubber Board quoted August RSS1 buyer at
289.50 Malaysian cents (68 U.S. cents) a kg, up 5.50 cents for
the week.

August SMR 20 buyer was one cent higher at 257 cents a kg.

Prices of tire-grade SIR20 in Indonesia are expected to stay
stable this week, with demand remained thin despite lower levels
there than in other rubber-producing countries.

"We expect the market to be stable because the rupiah is
relatively steady at around 15,000 against the U.S. dollar.
Buyers are also sniffing for prices," said one Jakarta-based
trader.

September rubber finished the week at 27.25 U.S. cents/lb fob
Medan, 27.00 fob Palembang and Surabaya and 26.75 fob Pontianak
and Jambi.