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.