Rubber prices forecast to continue increasing

Rubber prices forecast to continue increasing

SINGAPORE (Reuter): Southeast Asian traders said yesterday
rubber prices are expected to continue rising this week as demand
from Japan, China and Western tire companies exceeds supply.

"Because of the rain in September and October many shippers
could not conclude their contracts. Now they have to find raw
materials to fill the contracts, there's more demand than
supply," one Thai trader said.

Rubber should therefore remain bullish, particularly as
Japanese brokers are forecasting higher prices there and as
Chinese enquiries continue to bolster the market, he said.

Prices were pushed higher last week tracking markets in Tokyo
and Kobe and as local shippers scrambled for supplies to fulfill
strong demand due to contracts delayed by shortages over recent
months, brokers in southern Thailand said.

"Prices went higher and higher...The main reason was the
effect from Japan where the price was shooting up every day,"
said one trader.

The supply situation is improving as the rainy season draws to
a close but local prices are still rising.

"A lot more raw materials are coming on to the market but
prices are still going up," the trader said.

Thai benchmark RSS-3 firmed to around $1.52/kg for December-
March shipment compared with around $1.50/kg-$1.51/kg last week.

Malaysian traders said they also expected the rubber market to
extend its rally this week in anticipation of more enquiries from
Asian and Western buyers and tight domestic supply due to
flooding in key production areas.

"The market was supposed to undergo a correction to the recent
run-up but the resumption of Chinese buying turned sentiment
towards the end of the week," one trader said.

"The market now looks strong and people are optimistic prices
will surge despite this being the peak production period for
rubber," he added.

He said Chinese buyers were actively looking for more SMR and
sheet rubber for November through to January shipments.

"We feel China needs more rubber to replenish its stock."

Indonesian market

"The Chinese are also in the Indonesian market where prices
are much cheaper than in Malaysia. They are also interested in
Thai RSS3 but there is a shortage of raw materials there,"
another trader said.

Apart from China, South Korean, European and American tire
manufacturers are likely to buy for immediate requirements due to
fears of short supply in most producing countries.

"Rain continues to fall in most rubber growing areas in
Malaysia and there are reports of floods in Thailand," one trader
said. Dealers said local Malaysian production could have fallen
by up to 40 percent in October.

December RSS Ones buyer was quoted at 382 cents on Friday
versus 376.50 a week previously, and December SMR 20 buyer at 366
against 357 previously.

Indonesian traders said local rubber prices are likely to
remain steady in the coming week, on export demand from U.S. and
European tire-makers. Tire-grade SIR20 was forecast to trade in a
64.00-66.50 U.S. cents/lb range in the coming week compared with
62.00-64.00 U.S. cents/lb last week, they said.

An executive at one U.S. tire firm agreed that regional rubber
prices were still on the rise, but said the factors underlying
the rise were not as bullish as reported.

"There is quite a lot of rubber around, but prices are still
going up on talk of Chinese buying and rains in Malaysia. But the
rains are quite normal around this time of the year and the
rumors of Chinese buying (of Thai and Indonesian product) are not
confirmed," he said

The tire executive said Western consumers were not buying on
any scale as the U.S. economy was slowing. Japanese demand was
stagnant and China was reported to be facing foreign exchange
problems so it would not be buying as much as expected, he added.