Regional rubber looks for direction

Regional rubber looks for direction

SINGAPORE (Reuter): Southeast Asia's rubber market is likely
to be looking for direction this week, although the trade will
keep a wary eye on the region's shaky financial markets, traders
said yesterday.

Most of the trade feel prices will be range-bound with a
bearish tinge although Malaysian dealers feel they may move up
due to fears supplies will be pinched by forest fires in
Indonesia and a drought caused by the El Nino weather pattern.

"Currencies and local supplies are more of a concern, a dealer
in the Thai rubber center of Hat Yai said.

"The market seemed to pay more attention to the (Indonesian)
rupiah than to the fire because it will take some time before we
know exactly what kind of damage we are talking about," the
dealer said.

Indonesian traders said that while sentiment had improved
because of a slight uptick in buying, the volume being sold
remained modest.

"We have seen buying interest coming into the market and...
this is already enough to lift the sentiment which has been very
poor in recent months," a trader said. "(But) the quantity of
rubber being sold is quite small at about 100 tonnes."

Traders said some buyers came into the market at this time
because they feared prices might rise if the rupiah falls anew.
A senior rubber trader in Singapore said the market will probably
"take a pause" this week.

"There's nothing special going on. I don't think you're going
to see any direction. It's going to be like this for a few
weeks," he said.

The only players in the market who showed any sign of
enthusiasm were the Malaysians. Dealers in Kuala Lumpur said that
supply-demand factors will dominate the trade rather than the
region's wobbly financial markets.

"Rubber is likely to trade mainly on supply/demand with
currencies having little impact," a dealer said. "Unless the
(Malaysian) ringgit rises or falls sharply, then prices will be
technically adjusted."

They said demand for latex grades should revive because buyers
from the U.S. and Europe have to cover their positions and that a
shortage of raw materials is possible because of the drought
caused by El Nino.

"We will see a shortage of raw materials due to rains and the
effect of the El Nino next year which could prolong the wintering
period," a trader at a plantation house said.

Producers are also not selling aggressively because they are
uncertain about the long-term weather conditions.

"Rains combined with fresh demand could push SMR 10 (rubber)
up to 285 to 290 (Malaysian) cents (a kg)," a dealer said.
"Demand from Asian consumers is a bit slow but the buyers have to
place their orders if they need to buy stocks urgently," he
added.

A shortage in raw materials could also prompt more demand from
all sectors, including Western consumers.

But Singapore-based rubber dealers disagreed.

"Everybody is well-covered," a senior dealer said. The only
pressure seen on prices as a result of El Nino and the Indonesian
forest fires will be in forward months, he said.

"There's quite a lot of rubber nearby. It still doesn't look
good and prices do not appear to have any strength," said a
trader for a commodity house in Singapore.

"If anything, I think prices will head lower," a dealer said,
adding the bears were still in charge in the market.

The Thai benchmark RSS3 was quoted around 86.00-87.00 U.S.
cents per kg FOB Bangkok for November shipment and 93.00-94.00
cents on the same basis for January/February shipment.

Malaysia's benchmark November RSS1 buyer was quoted at the
close of trade on Friday at 281.50 Malaysian cents a kg, down
nine cents from the previous week.

In Indonesia, offer prices were quoted at 40.25 U.S. cents/lb
FOB Palembang for November shipment, 40.75 cents FOB Medan, 40.50
cents FOB Surabaya and 40.00 cents FOB Pontianak and Jambi.