Rubber markets to take a breather

Rubber markets to take a breather

SINGAPORE (Reuter): Surging southeast Asian rubber prices could take a breather this week on correction to the recent sharp advance, but traders said the underlying sentiment remained firm on worries over nearby supplies.

Continued rains in some of the main growing areas in Indonesia and Thailand have hampered tapping and drying of sheet rubber and raised concerns of delayed shipments from the origins.

But uncertainties over continued Chinese and western buying, amid growing beliefs that current values could be overpriced, could take some steam off the market.

"I think the market could remain at the current levels for the time being before taking another direction," a trader at a Japanese brokerage said. Another said: "Many shippers do not expect prices to go higher as the market is running out of bullish factors."

In Indonesia, some traders expect the market to trend steady to lower this week after a month-long rally. The absence of trade on Friday led some dealers to wonder if the market would be heading for a downward correction.

"Some buyers feel that our rubber is currently overpriced. If they stay away from the market, there is a possibility that prices might begin to ease next week," one said.

Another dealer said any slide in prices could be checked by the current tight supply in Medan, which has been hit by continuous rains that making tapping difficult.

"It all depends on how well stocked the (U.S.) dealers, who have been doing the buying of late, are," the dealer said.

Indonesian benchmark SIR20 was on offer in Medan at around 61.50 U.S. cents a lb after trading at 60.50 cents and up from 55-56 cents a week ago.

The Thai outlook seems fairly optimistic.

Traders said prices could stay firm this week as persistent rain hampered tapping. "The market will continue to be firm on a lack of supplies," one trader said.

Thai benchmark RSS3 traded at 135-136 U.S. cents a kg last week, up from 126-127 a week earlier.

"Maybe dealers in Europe and the U.S. are coming back from (summer) holidays and finding themselves caught in a situation where they have to cover," the trader said.

Malaysian prices, riding on the regional trend, could remain firm on expectations of tighter supplies due to rains and fresh demand from Europe and China.

"The market looks firm. We expect prices to rise as supply is likely to be tight in near-term," a dealer at a trading firm said. "The rains will continue to have an impact on the market."

Dealers said rains in some Malaysian rubber-growing areas has led to a slower flow of supply into the market. "There will a shortage of rubber and consumers like the Europeans are seen coming back to look for nearby requirements after the long summer holidays," the dealer said.

The Chinese have bought a fair amount of rubber last week and are likely to make more buying orders for SMR10, SMR20 and RSS3 rubber for nearby shipments.

Yesterday morning, Sept RSS1 buyer was quoted at 329.50 Malaysian cents a kg against 321 cents a week ago while Sept SMR20 buyer was quoted at 324.50 cents against 306 cents.