Rubber prices to keep on rising on rain

Rubber prices to keep on rising on rain

SINGAPORE (Reuter): Reduced supplies from Thailand and Malaysia because of rains and recent Chinese buying are likely to sustain rising regional rubber prices this week, traders said.

Indonesian supplies are far from short but heavy buying from dealers and consumers could push prices to one of their highest levels in two months, they said.

"I expect Indonesian prices to hit US$0.64 a lb by the end of this week," a senior dealer in Singapore said. "There will be continuous short-covering but on the supply side, there is quite a bit of rubber (in Indonesia)."

Indonesian prices opened steady following deals on Friday heard done at about 62 cents in various regions.

Traders said the underlying tone around the region remained bullish despite talk that China could slowdown buying after taking about 20,000 tons in the past two weeks.

"The mood is still bullish," one trader at a Japanese tire firm in Singapore said. "This current uptrend may continue."

He said the Chinese buying after a long lull and the Oct.7 earthquake near Indonesia's main producing area of Jambi were among the main factors driving prices higher.

Thai traders said south Thailand, the country's main region, started its rainy season this month, allowing rubber tappers to work only a few days this week. There will be heavy monsoon rains in November in the area and that should keep supply low next month, they said.

Traders said they were cautious in filling November shipment orders because of supply and price uncertainty in the weeks ahead.

In Malaysia, prices of tyre grade SMR20 rubber could rise but sheet grades are expected to stay flat, traders said.

Tight supplies because of prolonged wet spell will underpin sentiment despite expectations of a slowdown in Chinese buying, dealers said. Further buying by European and U.S. tyre makers and main users of SMR20 rubber will support the SMR market, they said.

"There will be a slowdown in Chinese buying (next week) but this will not stop SMR prices from rising further due to tight supplies," a dealer at a plantation firm said.

China has bought a fairly large quantity from producing countries since they started buying, dealers said.

One local dealer estimates Chinese purchases in Malaysia, Thailand and Indonesia at slightly more than 20,000 tons for October and November shipment.

"Now it all depends on the price level. They can afford to wait for prices to drop as they have covered most of their requirements," the dealer said.