Natural rubber prices slide on Thailand's baht flotation
Natural rubber prices slide on Thailand's baht flotation
SINGAPORE (Reuter): Natural rubber futures and cash prices fell sharply in Asia yesterday after Thailand, the world's largest producer, floated its currency to pull the country out of an economic slump and the baht crashed.
Rubber futures markets in Singapore and Japan were sent into a tailspin as the baht slid as much as 20 percent against the dollar and Thai export quotes instantly became far more competitive against regional competitors such as Indonesia.
"It will mean that Thailand will be selling rubber and that prices will be cheaper. Indonesia will have to take action by also selling cheaper rubber before it is too late," one Indonesian trader said.
"Buyers will take a wait-and-see attitude while waiting for prices to decline further. In general, I tend to think that we are entering a gloomy period again," he added.
Malaysian traders said they were also expecting market share to be lost to Thailand unless local prices were adjusted to meet the competition.
"We've got news that most U.S. buyers are flocking to Thailand and Indonesia because rubber is cheaper there," a Malaysian government trade source said.
Bulk delivery latex in Thailand was going for around 180 Malaysian cents a kg, compared to 200-odd cents in Kuala Lumpur. In Singapore, the August contract for RSS3 (ribbed smoked sheet) grade plunged 7.50 U.S. cents to 92.00 cents a kg, while September RSS1 was down 6.50 Singapore cents to 140 a kg.
"The market was very sellerish today. Everything was hit. The bearish sentiment was felt in all the rubber markets. It's been one of those rare days when volume was heavy for a change," a Singapore broker said.
"Uncertainty over the baht float dragged prices down. The market was already in a bear phase, a little rumor was heard and next prices were falling," another local broker said.
In Japan, the December rubber futures contract on the Tokyo Commodity Exchange (TOCOM) plunged by its limit of seven yen to 113.6 yen per kg and analysts said they expected the market to probe a downside of about 112.10 yen in the near future.
"There is no way to avoid the fact Thai rubber prices will break under 100 U.S. cents per kg soon. Everybody is taking the bearish view at the moment," a Japanese dealer said.
Thai rubber to Japan was recently offered at 105 cents per kg on an FOB (free on board) basis.
But the lower rubber prices in Thailand are expected to stimulate physical buying of Thai benchmark rubber by Japanese traders in producing countries and this point was not missed by Bangkok.
"We see it as a good move, but other exporting countries might find the move depressing initially as it will pressure their prices as well," Sanit Samosorn, a senior Thai agriculture ministry official in charge of rubber told Reuters.
After the market's early knee-jerk sell-off in response to Thailand's de facto currency devaluation on Wednesday there were signs, later in the day, the Southeast Asian rubber trade was taking time to contemplate where prices would head next.
Indonesian prices, at least, stabilized in late trade.
"What I can see is that buyers are taking a chance on this situation. We don't know yet what will happen overnight, so let us wait and see. We will have a clearer picture after Tokyo's and Singapore's reaction tomorrow," an Indonesian trader said.