SE Asian rubber market goes soft

SE Asian rubber market goes soft

SINGAPORE (Reuter): Rubber prices in Malaysia and Thailand may slide further this week due to poor demand and ample supplies reaching the market, traders said yesterday.

But prices in Indonesia are expected to be stable because encouraging demand is being balanced by adequate supply.

Poor demand for latex and a gradual inflow of supplies are seen pressuring Malaysian prices.

"I believe that prices for top grades of SMR may slide further," a dealer at a Malaysian trading firm said. "Latex is not sellable and moreover Thai rubber is much cheaper than us."

"Prices will continue to fall for a while as buyers from Europe are not buying because of the summer vacations," he said.

Singapore-based rubber traders said the market will remain soft with only small-lot buying by China seen as offering some support for prices.

"The small, nibbling purchases by China will keep prices stable," one Singaporean trader said.

Chinese buying was viewed as particularly constructive for lower grades of Malaysian rubber.

"SMR 10 and SMR 20 prices should hold on well because of some sniffing from China," a dealer said. "Basically there is no demand in the market. That's the reason why the market is falling along with more supplies coming in."

Dealers offered SMR CV at 412 Malaysian cents, SMR L at 312 cents, SMR 10 at 302 cents, SMR 20 at 301 and drum latex for July at 265 cents.

In Indonesia, rubber prices are expected to remain stable, traders said.

"Demand should be encouraging this week, but any rises are likely to be limited due to adequate supply," one dealer in Medan said.

SIR20 offer prices are seen moving between 55.50-56.00 U.S. cents/lb FOB Medan for August/September deliveries, at 55.25- 55.75 cents/lb FOB Palembang, Padang and Surabaya and between 55.00-55.50 FOB Jambi and Pontianak, traders said.

Supply is likely to stay adequate in most key rubber producing regions in Sumatra, with unseasonal rains in some parts such as Padang seen having little impact, traders said.

One latex dealer in Medan said latex prices were likely to come under pressure due to ample supply. Latex was last quoted at Rp 2,550-2,600/kg.

He said one state-owned plantation firm in Medan was expected to ship some 10,000 tons of latex to the United States and Europe up until end of this year, with prices between 111-112 cents/kg FOB.

The Malaysia benchmark August RSS1 buyer was quoted at the close on Friday at 339 cents a kg against 354 cents a week ago, and August SMR 20 buyers were at 300 cents against 299.

In Thailand, rubber prices extended their decline for the third week on increased domestic supply and lower price expectations among Japanese traders, exporters said.

Thai benchmark RSS-3 for August shipment eased to $1.27-1.28 per kg FOB Bangkok on Friday from $1.36 a week ago and $1.45- $1.46 two weeks earlier.

"Thai domestic supply rose this week due to clear, rain-free weather in southern Thailand which helped rubber tree tapping," a major exporter at the southern Thai town of Hatyai said.

Traders said Japanese buyers have placed only short-term orders in anticipation of a further slide in prices.

They said Chinese buyers continued to stay out of the market this week and many contracts ordered earlier were not delivered as they were not followed by related letters of credit.