SE Asian rubber prices may extend rally

SE Asian rubber prices may extend rally

SINGAPORE (Reuter): Southeast Asian rubber prices are expected
to extend a post-holiday rally this week on dwindling supplies
due to weather and other factors, traders said yesterday.

There were reports that raw material supplies in Thailand
could have dipped by as much as 60 percent due to wintering --
when trees shed leaves and production declines.

"The perception is that supplies are dropping, that's why the
price can hold," a Thai trader said. "It's a correct perception
for the time being but we can't say for how long."

Regional markets were closed for most part of last week for
Lunar New Year and Idul Fitri holidays, halting tapping in
Indonesia, Malaysia and Thailand.

This further aggravated the supply situation with production
in the midst of wintering, traders said.

Thai benchmark RSS3 rubber rose to around $1.65 a kg for
April/May shipment on Monday, from $1.57 on Feb. 16.

Japanese traders were the main buyers last week with prices
now too high for Chinese buyers, traders said. "Chinese buyers
will not be interested in the current prices," one said.

Drum latex firmed to $1.35 a kg from at $1.30 on February 16
on tighter supplies, traders said.

The overall trend for Thai prices was still higher, traders
said. "We might see a technical correction in Japan this week but
overall the trend is still bullish," one trader said.

But traders in Singapore were less optimistic over Tokyo
extending its bullish run.

"The Japanese market seems over-extending itself against the
physical market," one international firm's trader said.

In Indonesia, traders said prices were expected to be steady
this week as demand picks up after the holidays. But the upside
could be capped by buyers shying away from the market if prices
rose well above the 70 U.S. cent a lb level.

"I expect prices to be steady this week as buyers come back
into the market after the holidays," one Medan dealer said.

Another dealer said he was cautiously optimistic of prices but
added that sharp increases could give buyers cold feet.

"The buying has not been aggressive, so if prices go up too
fast buyers might want to sit it out for a while," he said. "I
have had no indication that buyers are short at the moment."

Tire-grade SIR20 was traded over the weekend at 71 cents in
Medan and 70 cents in Palembang, South Sumatra.

Wet latex was around Rp 2,788 a kg, compared with Rp 2,500 on
Feb. 16. One dealer said the higher prices were due to increases
in sheet rubber values.

In Malaysia, dealers said consumer demand could remain
sluggish until early next week.

They said some players and traders had gone on extended Lunar
New Year holidays and were only expected to make a return to the
market in early March.

Traders said prices were, however, beginning to strengthen
from a tighter supply of raw materials due to no tapping activity
during the long festive break and wintering.