SE Asian rubber market looks grim

SE Asian rubber market looks grim

SINGAPORE (Reuter): The end of a strike at U.S. tire-maker Goodyear and a Thai price rise could give the Southeast Asian rubber market a temporary boost, but the underlying mood is fairly grim, regional traders said yesterday.

The Thai government soothed irate tappers on Friday by raising its market intervention price to 29 baht (US$ 1.11) a kg from 27.50 baht.

A day later, a nearly three-week long Goodyear strike ended after the United Steelworkers of America reached a new six-year labor deal with the company.

"Goodyear might have a bit of an impact. This, along with the Thai news, could give the market a slight bounce," a senior trader with a commodity company in Singapore said.

"But the overall situation is still fairly grim," the trader said. A rise in production with the end of the wintering period, when latex flow slows as trees shed their leaves, could send prices sliding again, he added.

But a dealer with a foreign brokerage house said the news would be ignored by a market already weighed down by holidays in Japan and Thailand on Monday and poor consumer buying.

"I don't think Goodyear will have that much of an impact. Basically, we need orders to pour in. If there are no orders, the price won't inch up," she said.

In Thailand, traders slammed the government's decision to intervene in the market again after a protest by rubber tappers in the south of the country.

"It seemed like this government succumbs to the demands of any mob whose number exceeds 1,000," said a dealer in the Thai rubber center of Hat Yai.

"But what the government did distorted the market. World prices are bearish. We will have difficulties meeting obligations now that the local prices are high," he said.

The Thai government has bought about 45,000 tons of RSS3 rubber from the local market since March to prop up prices and has said it intended to buy more.

The Thai benchmark RSS3 was indicated at 108.50 U.S. cents a kg FOB Bangkok on Friday against 106.00 cents the previous week.

In Indonesia, the strike at Goodyear had dampened market sentiment and driven prices for SIR20 grade rubber down.

"The strike in Goodyear has, for instance, affected the contracts for May shipment. Those contracts have had to be suspended pending further developments," a trader said.

Prices could fall to as low as 45.00 U.S. cents a lb over the next few weeks because of the prolonged poor demand, Indonesian traders said.

"We expect prices will at least stay the same this week, but the chance for prices to fall is quite high due to poor market sentiment," one said.

Malaysian traders said prices should consolidate further, but the lack of demand continued to weigh on sentiment.

"There were no sales, no leads," said a trader, referring to Friday's trade. "I don't see anything changing this week."

The supply of latex was steady and looked certain to build stocks further and put pressure on raw material prices, the traders said.