SE Asian rubber likely to trade lower

SE Asian rubber likely to trade lower

SINGAPORE (Reuter): Rubber is likely to trade lower this week
with pre-festive holiday selling, ahead of the Chinese New year
break from Feb. 19, and thinning consumer demand, weighing on
prices, some Southeast Asian traders said yesterday.

But others took the opposite view, noting that the long Lunar
New Year and Idul Fitri holidays and early wintering in Thailand
and Malaysia could limit supplies and buoy prices.

Taking a bearish view of the market, one trader at a U.S. tire
firm said in Singapore that the holidays and wintering period --
when trees shed leaves and production declines -- had been
factored into the market.

"The tapping holiday...that's not bullish. Small farmers may
dump the raw materials to get cash for the holidays," he said.
The markets in Malaysia, Indonesia and Singapore take almost a
week's break from Feb. 19 for the region's premier holidays.

He noted abundant raw material supplies in Indonesia's top
rubber port of Palembang and added that supplies at the country's
processing factories may continue to swell until the holidays.

"You can buy a pound of Indonesia's SIR20 rubber today at 66
U.S. cents. If the same (downward) pattern that we saw in the
last two weeks continues, they may touch 60 cents," he said.

"There is not a lot of buying by tire consumers. Origins
(producers) have to sell at some point to bring prices back in
line," he said.

Traders in Indonesia argued prices could hold current levels
but accepted that strong upside potential was limited.

"Most inquiries are likely to come from European and Asian
dealers in the coming week, with offtake seen in small
quantities," one Medan dealer said.

Sentiment on SIR20 improved late last week following continued
gains in Tokyo and fresh enquiries from Europe and Asian
countries, another said.

SIR20 was traded at 65.00-67.50 cents late in the week against
64.50-65.00 previously in major ports.

One latex dealer in Jakarta said domestic demand for high
amoniac grade latex was likely to remain slow, adding prices
would probably remain around Rp 1,700 (US$1.17).

Thai traders said shorter supplies at the start of wintering
helped prices of benchmark RSS3 rubber, basis March, to finish
last week at 154 cents a kg, up from 150 a week earlier.

Drum latex was offered at 130 cents compared with 135 cents a
week ago, one trader said.

Traders said supplies in Thailand's main growing area in the
south were beginning to become tighter as the wintering season
was beginning slightly earlier this year.

But others noted that an early start to wintering could also
mean an early return to the normal production cycle.

In Malaysia, traders said wintering and expectations of
consumer buying before the holidays could help sentiment.

"We expect a lot more inquiries from Asian and Western buyers,
If they want to buy, they have to do it now," a dealer at a
plantation firm said.

"Moreover, wintering has started in some main growing areas
and this has caused latex shortages."

Dealers said most producers will be holding back their stocks
for fear of tight supply of materials. They said output will
normally drop by as much as 45 percent a month during the
wintering which normally occurs between February and May.

Dealers said drum latex prices are quoting at around 315 to
320 cents a kg for February/March.

"Latex is hot. And we may expect to see more latex inquiries,
from New Zealand, Australia, Korea, Taiwan and Europe next week,"
one said.