Rubber trade worried about Thai stocks

Rubber trade worried about Thai stocks

SINGAPORE (Reuter): Southeast Asian rubber prices are likely to drift lower this week due to soft demand while the trade keeps a wary eye on Thailand after reports emerged last week that Bangkok may sell off stocks, dealers said yesterday.

Rumors swirled around regional rubber markets last week that Thailand's attempt to balance the budget in order to meet conditions set by the International Monetary Fund (IMF) for a bailout package could force it to sell rubber.

"The trade is still concerned about it. If that happens, it's going to knock the stuffing out of the market," one dealer in Singapore said.

The Thai government has vigorously denied the rumors, although some market players were still cautious, dealers said.

Sanit Samosorn, deputy director-general of the Thai agriculture department, reiterated on Friday that Bangkok had no plan to sell its rubber stock and confirmed the government had more than 70,000 tons of rubber in its stockpile.

"There is no plan to sell now. The price would be pressured further if we do that. What would be the point of intervention then?" he said.

Demand around the region was expected to remain weak this week with most of the major consumers in the United States and Europe away for the summer holiday season.

"All the buyers are on the beach trying to have a tan," a dealer for a Singapore rubber trading house said.

"Consumer demand has been virtually non-existent following news of Thailand's high stock levels," a dealer in Indonesia said. "The only buying interest has been from Singapore dealers."

Traders in Malaysia said even the Japanese and Korean buyers who have been doing some bits of buying had disappeared from the market.

"Nobody's at their desk to look at the market or buy rubber," a dealer in Malaysia said.

"The market is still under the weight of the Thai stocks news because buyers know that there's plenty of rubber around," a dealer in Indonesia said.

"Our market has been dampened by the news. I don't think prices can go up in the near term, especially with consumer demand drying up," he added.

Malaysian rubber dealers said the volatile ringgit has even affected sales by local agents to foreign clients.

"The crux of the matter is that all movements in the ringgit is worrying players, as Malaysian rubber is traded in the ringgit," a trader said.

Malaysia's benchmark RSS1 rubber for August buyer was seen at 247.50 Malaysian cents a kg at the close of trade on Friday, down three cents from the previous week. SMR 20 for August buyer ended at 246 cents, down four cents.

Malaysian dealers offered SMR 20 on Friday at 243 cents a kg, SMR CV at 289 cents, SMR L at 271, SMR 5 at 253 cents, SMR 10 at 245 and drum latex at 189 cents.

In Thailand, the benchmark RSS3 was indicated at around 97.00- 98.00 U.S. cents a kg FOB Bangkok for October shipment and 100 cents on the same basis for December shipment.

Indonesian tire-grade SIR20 rubber was offered 0.25-0.50 cents/lb lower at 43.50 U.S. cents FOB Medan, and 43.00-43.25 cents FOB Palembang, Padang and Surabaya.