Japan traders shift to RI synthetic rubber

Japan traders shift to RI synthetic rubber

TOKYO (Reuter): Japanese traders have cut their dependence on Thai rubber, shifting to cheaper Indonesian rubber and synthetic rubber, Japanese traders said yesterday.

The move is an attempt to cut costs and ensure steady supply lines, they said.

"Japanese tire makers have been shifting to cheaper rubber to cut costs. We also have learned a lesson that it is too risky to depend on Thai sheet rubber too much," said an official at one major trade house.

The official said Japanese end-users had lost confidence in Thai rubber due to delayed shipments in May, and because Thailand canceled shipments of its benchmark Ribbed Smoked Sheet (RSS) rubber to Japan in the spring of 1994 at low contracted prices after natural rubber prices rallied sharply.

Also, a widening price gap in early June that left Thai rubber about 20 cents per kg more expensive than Indonesia's Technically Specified Rubber (TSR) 20 prompted Japanese end-users to shift to TSR 20.

Japan imported 340,532 tons of natural rubber in the first six months of 1996, against 344,494 tons in the same period of 1995, Finance Ministry data showed.

Imports from Thailand fell to 255,499 tons in the first half of this year, against 288,713 tons in the same period last year, while imports from Indonesia rose to 60,612 tons from 21,330 tons, the data showed.

The trend of using cheaper TSR and synthetic rubber rather than Thailand's benchmark sheet rubber was likely to continue, the Japanese traders said.

Synthetic rubber accounted for 43.2 percent of total Japanese rubber consumption in the first three months of 1996, up from previous years, the Rubber Trade Association of Japan said.

"With the decline in domestic car production, Japanese tire makers have been focusing more on overseas markets and they need to shift to more economical rubber in order to be more competitive in world markets," an official of a major tire maker said.

Rubber demand for tires that will be exported was expected to hit a record of 41.5 percent in 1996, according to the Japan Automobile Tire Manufacturers' Association, up from 35.4 percent in 1991.

"We are also considering shifting to TSR or synthetic rubber. For exports, we are likely to focus on the Asian market, including China, and South America, which have much growth potential," said Naoto Saito, president of Sumitomo Rubber Industries, Ltd.