Rubber prices likely to, remain firm next year
Rubber prices likely to, remain firm next year
KUALA LUMPUR (Reuter): World rubber prices, which bounced to six-year-highs in 1994, are likely to remain firm throughout 1995 as the global economy recovers, industry officials and traders say.
"Given the strong demand, the outlook for natural rubber is very good, particularly from the perspective of the producers," James Hegarty, buffer stock manager for the International Natural Rubber Organization (INRO) said on Thursday.
Sucharit Promdej, secretary-general of the Association of Natural Rubber Producing Countries (ANPRC) in Kuala Lumpur agreed.
"As it is now, prices of natural rubber are sustaining at high levels," said Sucharit. "Apart from interference from the rains and the shortage of rubber tappers, the approaching onset of the wintering season at the beginning of the year may lead to tighter supply" and higher prices, he added.
Malaysian RSS grade rubber was quoted at 386 Malaysian cents (US$1.51) a kilogram (2.2lb) yesterday, compared with 209.50 cents ($0.82) one year ago.
Traders said a decline in production from Thailand, Indonesia and Malaysia, the top three producers who account for 80 percent of the world's rubber output will also boost prices.
"Prices are expected to strengthen at least until the end of March but rubber will continue to trade in the higher range for the whole year," said one senior dealer in Kuala Lumpur.
Output
The dealer said output is also declining as more rubber plantation land is developed for commercial use, particularly in Malaysia, as producers lose interest due to the low prices in early 1994.
"Prices became remunerative only in the second half of 1994 and it will take some time for producers to increase output," the dealer said.
World rubber prices soared in July 1994 when China entered the market and bought the commodity in huge quantities for its industrial use.
Although China stepped out of the market in early October, dealers said prices continued to climb on increased demand from the United States and Europe.
Hegarty said this was due to the rising world demand for natural rubber, particularly by European and U.S. tire producers.
"The United States economy is still recovering and this has boosted automotive sales which in turn stimulates the tire industry," he told Reuters in Kuala Lumpur.
The Kuala Lumpur-based INRO, which groups 27 producing and consuming countries, is the last of the global commodity pacts with economic teeth but it has failed to cool sizzling rubber prices.