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.