Rubber prices in SE Asia seen flat on soft demand

Rubber prices in SE Asia seen flat on soft demand

SINGAPORE (Reuter): The Southeast Asian rubber market is seen wallowing in the doldrums this week due to sluggish demand, and curbs on supply from the current wintering are unlikely to support prices, traders said yesterday.

"The market is very weak. It's still dominated by a very, very sluggish demand picture," the chief rubber dealer for one firm told Reuters.

"It is very annoying. There's no direction in the market and we don't know what exactly has happened...Why on earth there are no buyers," a trader in Indonesia added.

The wintering season, which normally curtails output in natural rubber producing countries like Thailand, Indonesia and Malaysia, will probably provide minimal assistance to prices, if at all, the traders said.

"The trade now expects the wintering season to be very mild," one Singapore-based dealer said. "The fundamentals are pretty bearish."

Another factor weighing on the market is the soft Japanese market, a Thai trader said.

"I think Tokyo's trend is a main factor for weak prices," a trader in Hat Yai said, adding he hoped the fall in supplies would help "support the prices."

The benchmark RSS3 rubber for March delivery was quoted on Monday at around 121.00-122.00 U.S. cents a kg from 122.00-122.50 cents on Wednesday. The latex price was unchanged at 93 cents a kg.

In Indonesia, traders expect the bearish trend for the tire- grade SIR20 to persist because of the absence of buyers. They added that the market's lack of direction also made it difficult for them to quote a price.

"It's hard to quote a price because we are still wondering why no buyers are entering the market," one trader said.

Sporadic U.S. buying lifted the price slightly last Thursday but no fresh deals came to the market on Friday, traders said, despite reports that consumption is beginning to pick up in the United States.

The SIR20 March price was unchanged on Friday at 53.50 U.S. cents a lb FOB Palembang, traders said. In Medan, offer prices were quoted at 53.75 cents while offer prices in Surabaya for SIR20 reached 53.625 cents, down from 54.00 cents on Thursday.

Traders said offer prices were quoted at 53.625 U.S. cents a lb FOB Padang against Thursday's 54.125 cents. In Pontianak and Jambi, offer prices for SIR20 were quoted at 53.25-53.50 cents, against 53.75 cents the previous day.

Some Indonesian traders said they may end up selling SIR20 at 53.00 U.S. cents a lb in the absence of fresh factors to boost prices.

Malaysian rubber prices, on the other hand, are also expected to stay flat this week though there could be some activity as dealers return from the Chinese Lunar New Year holiday season which ended on Friday.

"Activity may pick up this week but I don't think it will be significant enough to change the course of the market," said a Malaysian dealer.

"Demand has been poor the last couple of months and buyers are unlikely to return in a big way over the short term," the dealer added.

The Malaysian Rubber Exchange and Licensing Board quoted the benchmark RSS1 at 303 Malaysian cents a kg for March buyer at the close of the market last week, down a cent a week earlier.

Drum latex was offered by trading houses at 237 cents a kg FOB on Friday against the previous week's 236-238 cents a kg.

Malaysian dealers attributed the soft demand to the previous purchases by European and U.S. buyers of most of their first quarter, 1997 requirements.

They said prices should get some assistance as producers hold back supplies in anticipation of higher price levels during the wintering period.

"Overall, the market should not be bad. Supply may get tighter over the next couple of months and this should help prices," one trader said.

But Singapore-based dealers were more pessimistic and said any major uptick in buying may not emerge until the second half of the year.

"We may see some recovery in demand when world economies recover in the second half of 1997," a trader for a foreign brokerage house said. "But demand is simply not there at the moment and the fundamental picture is not rosy."