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.