SE Asian rubber prices head for consolidation
SE Asian rubber prices head for consolidation
SINGAPORE (Reuters): Southeast Asia rubber prices are headed
for a consolidation this week as nervous regional currencies and
a weak Tokyo market take center stage, dealers said yesterday.
Recent talk of emerging Chinese demand of around 100,000
tons for central reserves were taken with a pinch of salt,
dealers said.
"I am skeptical about Chinese demand. I suspect it's more
likely just talk," said a Singapore-based dealer. Chinese buying
in the physical market so far had been "scattered", he added.
"The market may be due for a consolidation. Tokyo broke 95 yen
(per kg) and is likely to try and find support, especially if the
dollar continues to strengthen against the yen," said a senior
dealer with a European company.
"I don't expect a big move in prices. They could try to go up
a bit, but generally should consolidate," the dealer said.
On Monday, the dollar stood a shade below 130 yen after rising
to a high of 130.55 yen in New York on Friday.
Japan's benchmark May rubber on the Tokyo Commodity Exchange
(TOCOM) fell below key support of 95 yen per kg on Friday before
ending at 94.9 yen.
Rubber demand remained weak, dealers said.
Many European buyers have already closed their book for 1997
and are likely to remain absent for the rest of the year.
Poor demand was expected to put pressure on the dollar-
denominated Indonesian tire-grade SIR20 rubber prices as the
rupiah continued to weaken against the U.S. dollar, dealers said.
"Buyers are putting pressure on prices by showing little
interest because they know sellers will buckle and sell at lower
prices," one dealer said.
"The buyers' perception is that a stronger dollar will mean
more revenue in rupiah terms for sellers, and so (Indonesian)
prices should adjust lower," the dealer said.
The rupiah fell to 4,000 to the dollar on Friday. It was
around 4,075 at 0420 GMT yesterday.
Dealers said Malaysian and Thai rubber were at a discount to
Indonesia's SIR20 and there was speculation SIR20 prices could
decline to 31 U.S. cents/lb by the end-December.
"There is speculation in the market that prices will decline
to 31.00 cents/lb by the end of December," he added. "This is
just speculation, let's see if this happens."
Dealers said February shipment SIR20 was done at 34.50
cents/lb FOB Palembang.
Offers were heard at 34.50-35.00 cents FOB Medan, 34.375-34.50
cents FOB Palembang, 34.25 cents FOB Padang and 34.00 cents in
Jambi and Pontianak.
A holiday mood muted interest in the Thai market and Asian
buyers were bidding the prices down, dealers said.
Bearish regional economic outlook and poor prospect for the
auto industry further dampened sentiment and depressed prices.
March was offered around 70-72 US cents per kg FOB Bangkok.
April was bid at 69 US cents and May at 70 US cents on the same
basis but the offer prices were two-three cents higher.
Malaysia prices are likely to ease slightly on currency
factors, but the downside could be limited by supply concerns
during the monsoon rains, dealers said.
"The market is depending on currencies, said one. "The ringgit
rebounded on Friday after government measures to curb economy."
Consumers would continue to stay at the sidelines while
waiting for a clear ringgit trend, he added.
The ringgit rose to 3.68 to the dollar by midday yesterday
against 3.71 on Friday.
"Most consumers have already covered their positions this year
and are only checking prices for forwards contract of SMR grades
right until March," a dealer said.
On Friday, Malaysia's benchmark, January International Ones
RSS buyer was seven cents down at 270 cents against a week ago.