RI turmoil may keep rubber prices secure

RI turmoil may keep rubber prices secure

SINGAPORE (Reuters): Continuing worries over instability in Indonesia, one of the world's biggest rubber producers, are likely to support prices this week, regional traders said yesterday.

However, they expected the market to stay quiet with little activity due to lack of demand across the region.

Former Indonesian President Soeharto announced his resignation last Thursday after 32 years in power, and former Vice President B.J. Habibie was sworn in as his successor.

"Indonesia could be stabilising after Soeharto quit, but most people are still adopting a wait-and-see attitude," said one Singapore-based trader.

Rubber futures prices rose last week, backed by expectations rubber supplies from Indonesia could fall as a result of social unrest there.

"I think prices will be supported this week but I don't see big gains because there is still no demand," the trader said.

Prices in Indonesia went up at the end of last week as fewer traders were available during the nation's social unrest, but traders expected market sentiment to stay bearish this week.

"We don't know what's going to happen next, but surely the political situation will remain the main issue," said one trader in Jakarta.

"The rubber market is still strictly ruled by supply and demand...the political situation has caused buyers to shun the market and turn to countries such as Malaysia and Thailand," said one trader in Padang, west Sumatra.

Tire-grade SIR20 ended last week at 33.50 U.S. cents/lb for June shipment fob Medan. June shipment was quoted at 33.50 fob Padang in west Sumatra.

Traders in Malaysia said prices would depend on the political developments in Indonesia this week.

"For now, the situation in Indonesia is calm but we never know what will happen next," said a trader in Kuala Lumpur.

However, the tight supply situation for Malaysian rubber should keep prices stable, dealers said.

On Friday, the Malaysian Rubber Board quoted the benchmark RSS1 at 303/305 cents a kg and SMR 20 at 296/298 cents a kg.

In Thailand, rubber prices were firmer last week and concerns over nagging political uncertainties in Indonesia would remain the main market factor this week, Thai traders said.

The upside could be limited by market talk the Thai government had quietly unwound 30,000 tonnes of rubber from its stock into the market.

"Some buyers rushed to cover short positions. Although the tension seems to have eased somewhat, lingering uncertainties still caused concerns about exports as most people in this business there are ethnic Chinese," said a Hat Yai trader.

Thai RSS3 for July shipment rose to 79 US cents a kg on FOB basis compared with 78 US cents on Thursday. August was quoted at 80 cents and September 81 cents.

"But market talk that the government had dumped 30,000 tonnes of rubber from stocks into the market caused buyers to bargain hard for lower prices," said another trader.

"We cannot get confirmation because there is no public auction as promised by the government. It could have been a hush deal," he said.

A senior government official at the Rubber Estate Organization declined to comment on the talk.