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.