Rubber prices

Rubber prices rise on Medan riot concerns

SINGAPORE (AFP): Natural rubber prices are expected to remain firm for the next few weeks as labor riots in Indonesia compound an already tight supply situation and rising demand, dealers said yesterday.

Prices of Technically Specified Rubber (TSR) 20 rose two-to- 2.5 Singapore cents a kilogram (2.2 pounds) here yesterday as traders bought futures contracts to hedge against a disruption in supply from Medan, dealers said.

Prices for May Ribbed Smoked Sheet 1 futures closed at 148.00 Singapore cents (95 U.S. cents) a kilogram, RSS 3 at 94 U.S. cents and TSR 20 at 170 Singapore cents on the Singapore Commodity Exchange yesterday.

The price of TSR 20 yesterday represented a 4.5 cent rise from Friday before the trouble started, while RSS 1 was up 1.75 U.S. cents and RSS 3 gained 2.25 cents.

Medan is one of the largest ports for shipment of Standard Indonesian Rubber (SIR) 20, which is produced to customers' specification and shipped primarily to the United States.

Dealers said that although most factories around Medan have reopened since last week's riots by workers demanding higher wages, some were operating with half their workforce.

Only two or three factories remained closed as owners continued wage negotiations with workers' unions, dealers said.

Delay

A Japanese buyer, who is experiencing a delay in shipment of 80 tons of the raw material, said that the problem was not serious as most people made it out to be because Medan port was still open.

"Only four of our containers have been deferred to the next vessel, which will sail in a week's time," he said.

A major buyer of SIR 20 said his shipments had been on target so far but added that if things worsen he would have to look to other countries, such as Thailand, Malaysia, India and the Philippines, for supplies.

Dealers said the supply situation in Thailand, the world's largest producer, was also tight because the "wintering season" was expected to continue into May. Good demand from Chinese buyers also affected supply.

Wintering is a period beginning around February when rubber trees shed their leaves and produce less latex.

"I think the run-up will continue for another four to five weeks. Prices can move up another two-to-two-and-a-half cents from here," said one of Singapore's leading brokers.

Dealers said prices were experiencing a correction just before the Medan riots, following a strong rally which began at the end of last year and lasted until last month.

The rubber market had been underpinned by a stronger-than- expected recovery in the U.S. economy and tight supply in Thailand and Indonesia, the two largest producers, dealers said.

Recent Chinese purchases also aided market sentiment, they said.

China was rumored to have bought 30,000 tons of RSS 3 yesterday, but some dealers said the actual amount was likely to be smaller.

"The undertone of the market was steady even before the Medan riots," a European dealer said, adding he expected Ribbed Smoked Sheet (RSS) 3 prices to rise at a faster rate because it was being traded at a discount to TSR 20.

A European buyer said prices should stabilize if riots in Medan did not flare up again.

"Prices should hover around this level if the situation calms down," he said.