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.