Malaysian rubber prices weak, INRO entry awaited

Malaysian rubber prices weak, INRO entry awaited

KUALA LUMPUR (Reuter): Malaysian rubber prices were poised to end another week sharply lower as the International Natural Rubber Organization (INRO) studied the possibility of supporting the market through an intervention.

"INRO hasn't been in the market for four years now and I don't know whether their involvement is going to change anything much," a trader told Reuters on Friday.

The INRO's five-day indicator dipped on July 10 to 182.48 cents a kg, a level where the group may buy rubber from the market.

But an official for the international rubber body hinted that it would not intervene in the market unless the indicator price fell to 172 cents, the level where INRO was obliged to buy rubber from the market.

"As it is now, it's only at the may-buy level," the INRO official said.

Traders were generally of the opinion that INRO would wait for lower levels. "INRO will only intervene if (the indicator) reaches around 177-180 cents," said one.

Malaysia's benchmark RSS1 buyer for August was quoted at 227 Malaysian/Singapore cents (91 U.S. cents) a kg at midday Friday, down 16 cents from the closing price a week ago.

The popular SMR20 grade came off 4.50 cents to 232 cents a kg. "The SMR20 always holds a little firmer than the RSS1 because its more popular with consumers," said a trader, adding that there was some shortcovering of the grade despite the bearish last two weeks. On Friday, a total of 2,000 tons of the SMR20 was reported traded to Germany and China.

The trading price of the SMR20 at midday Friday was 232 cents. Traders quoted other grades such as the SMR5 at 244 cents, the SMR10 at 235, the SMR L at 280, the SMR CV at 299 and drum latex FOB at 198.

Traders said the official price of the RSS1 could fall by another 10 cents in the week ahead. They also estimated the SMR20 to be officially cheaper by another five cents.

"There is still no indication of buyers returning to the market in a big way," said one trader. "The Europeans are having their summer holidays while all others are generally sidelined, so I guess we'll still see some consolidation in prices."

Malaysian rubber prices have been in the doldrums for nearly 18 months now, mainly due to weak foreign interest and competition from Thailand and Indonesian rubber.

The flotation of the Thai baht last week worsened the impact when it dragged down prices of Thai rubber as well as others in the region.