Regional rubber price rally seen shortlived

Regional rubber price rally seen shortlived

SINGAPORE (Reuter): Regional rubber prices are seen remaining buoyant in the coming week but traders said further upside potential is limited by prospects of a seasonal production rise and a dearth of keen buyers.

"The market is due for a correction," said a trader at a U.S. trading house in Singapore.

"Production is quite good in Thailand and the market has discounted all the bullish factors."

"In the absence of heavy buying, the market may set back slightly, reassess the position and make the next move."

Traders in Thailand, faced with a tight nearby supply situation and difficulties of fulfilling outstanding orders, said there were signs that prices were letting up after the recent strong rally.

"Everyone wants it (prices) to slow down. How much higher can we take this kind of prices?" one Bangkok trader said.

The Thai government moved this week to reduce its rubber buying and began talks to find a solution to outstanding government shipments of about 123,000 tones.

Trade sources said the Thai private sector was also faced with difficulties in meeting its own contracted deliveries.

The main private sector contracts outstanding are to the Japanese and Europeans, led by French tyre-maker Michelin

Japanese rubber prices also soared this week on the back of a lack of prompt shipments from Thailand.

A Thai government panel set up to discuss rubber shipment snags will meet again on Monday to possibly consider rescheduling shipment dates.

Singapore brokers said the market would await outcome of the panel's talks. "The outcome will be a key market factor next week," one said.

Traders said the Thai move on rubber buying did not help the immediate supply situation.

"The (nearby) supply picture is not quite clear at the moment," one Thai trader said, adding that the market was wondering whether producers were hoarding the raw material.

"The Thai market is in total disarray. It has now become more than a price issue," a Western tyre firm's trader in Singapore said.

"Buyers are not able to get RSS3 rubber, regardless of the price." He said many Thai RSS3 rubber buyers had been forced to look for substitutes such as the TSR20 grade, whose price has also risen in sympathy with the RSS3.

Indonesian traders reported brisk business for Sumatran origins with Aug SIR20 FOB Belawan trading at 46 U.S. cents a pound this week and Aug Palembang at 45.75 cents, both up slightly from last week's levels. Traders in Malaysia are bullish on the immediate market outlook, saying that Thai rubber shipments woes and further support from European and Asian consumers could underpin sentiment.

"The market is still good and prices are sure to move up further as buyers come to Malaysia for their supplies," a trader said.

He said there were talks that Thai dealers could default on their outstanding shipments although the Thai government is trying to reschedule the dates.

Dealers said Chinese buyers, who have bought some fair quantities of RSS3 rubber from Thailand, are looking for Malaysian sheet and SMR rubber.