SE Asian rubber glued to currency market

SE Asian rubber glued to currency market

SINGAPORE (Reuters): Currencies will be the buzzword for the Southeast Asian rubber trade this week, although a fire in the rubber center of Hat Yai will help support rubber prices in Thailand, traders said yesterday.

"The (Indonesian) rupiah fluctuations have driven the market crazy. Buyers are having difficulty placing their bids, while traders complain the fall of the rupiah keeps rubber prices down," said one trader in Indonesia.

"If currencies keep devaluing, prices are going to be weaker. There's also still a lot of nearby rubber around. I don't think this week is going to be exciting for the trade," a European dealer in Singapore added.

Regional financial markets were rocked by renewed turmoil last week, with the Indonesian rupiah leading the way in diving to fresh lows at just over 10,000 rupiah to the U.S. dollar.

Dealers in Malaysia said prices will take their cue from the currency fluctuations in the region.

"Currencies in Southeast Asia look bad. And local prices have to be adjusted accordingly," said one dealer.

Traders said demand was pretty weak with consumers waiting for calm to return to the financial markets before buying.

"They feel there is still room for prices to come down and they are holding back," said one trader.

Dealers in Malaysia said producers were quite cautious in selling as they feared there may be buyers who could default on purchases.

"It is hard to say how the market is going to be in this kind of situation, but it is safe to say that prices may fall again on Monday. Our attention is still on the rupiah and its problems," a dealer in Indonesia said.

Rubber traders in Indonesia said supply was tight in a number of areas and dealers in Malaysia predicted it may tighten further with the approach of the wintering period.

"Many rubber trees do not produce latex smoothly after experiencing the severe drought in previous months. Those trees need to adjust to the present climate," a trader said.

A severe drought caused by the El Nino weather pattern hit many rubber farms in Indonesia and around Southeast Asia.

In Thailand, a huge blaze which gutted a warehouse on Friday in Hat Yai and destroyed 38,000-44,000 tons of government rubber was expected to help support local prices, dealers said.

The rubber was committed as a part of 130,000 tons of sheet rubber the government sold to China in December for 1998 delivery.

"The government will have to enter the market to fill the shortfall and that should bode well for the local market," said a trader in Hat Yai.

The Thai benchmark RSS3 rubber for June shipment was quoted around 62-63 U.S. cents a kg FOB Bangkok while March and April fetched a quote of around 60 cents on the same basis.

In Indonesia, offer prices in trading centers such as Medan, Palembang and Surabaya were mostly quoted at 30.75 cents a kg.

Malaysia's benchmark RSS1 buyer for February rose 11 cents to Malaysian 284.50 cents a kg last week. February SMR 20 buyer was up 5.50 cents to 279.50.