SE Asian rubber prices may rise with Thai buying
SE Asian rubber prices may rise with Thai buying
SINGAPORE (Reuter): Southeast Asian rubber producers, hammered in the past few weeks by falling prices, are optimistic sales will improve this week due to Thai government buying support for the market, regional traders said yesterday.
The trade will benefit from the expected start of the Thai purchasing program at the new higher intervention price of 29 baht a kg, raised from 27.50 baht a kg previously, and a continuation of modest Japanese buying, they said.
"Prices are going up because of what is happening in Thailand. This week's trend will be bullish and the chances for prices to shoot up are quite big," said one trader in Jakarta.
"Supplies of RSS3 are getting right because of shortcovering after the government moved up the delivery date for its purchase to May instead of June and July," a Thai dealer said.
But other regional traders were skeptical the combination of Thai government intervention and Japanese buying would be enough to pull the market out of its extended rut.
"For me, that kind of thinking is speculation. I don't see anything to bring the market out yet. There are no orders coming in and that's the bottom line," a dealer for a foreign brokerage house in Singapore said.
"If you're talking about sales, then I think we saw more covering by local agents for earlier sales made to overseas clients, not fresh demand," a dealer in Malaysia added.
Another Malaysian analyst said she had been informed that the order books of most European and U.S. buyers were full until the third quarter of 1997.
"This will indirectly make Malaysian rubber more competitive, as it will become cheaper than Thai rubber," a dealer in Malaysia said.
A continuation of the sharp currency fluctuations in Southeast Asia last week, following the failed speculative assault on the Thai baht, will also make it difficult for rubber producers in the regions.
"All of these currency fluctuations have made planning difficult, or confusing to say the least," a trader said.
The Buddhist Vesak holiday, which will be celebrated on different days this week in Southeast Asia, may also put a damper on trade, dealers said.
Thailand, the world's biggest producer of natural rubber, is celebrating the holiday on Tuesday. Singapore and Malaysia will hold their celebrations on Wednesday and Indonesia on Thursday.
The Thai benchmark RSS3 grade rubber was quoted last week at around 115.00 U.S. cents a kg FOB Bangkok for July shipment and 117.50 cents for August shipment against 112.50 and 114.00 cents respectively the previous week.
"Japan is the only major buyer now. There were some bids from the U.S. in the regional market," a dealer in the Thai rubber center of Hat Yai said, adding though that no major deals have been concluded.
The Thai Rubber Association has projected that Thai rubber exports during the second quarter of the year will slide by almost 15 percent to 270,000 tons due to sluggish demand.
In Indonesia, a deal was done at 48.00 U.S. cents a lb FOB Palembang for July/August shipment.
Offer prices, though, were heard at 48.50 cents in Palembang and Padang, 48.75 cents FOB Medan, 48.25 cents FOB Surabaya and 47.75 cents FOB Pontianak and Jambi.
"Many traders are willing to wait a little bit longer for prices to go up further. Tight supply of raw material also boosted sentiment," a dealer in Indonesia said.
In Malaysia, shortcovering for the popular SMR20 grade rubber was seen, but trading was thin due to soft demand.
"It was more of an adjustment due to higher regional prices," a trader in Kuala Lumpur said, referring to the rebound in the market for four consecutive days last week.
The Malaysian Rubber Exchange and Licensing Board (MRELB) quoted the benchmark RSS1 for June buyer at 275.50 Malaysian cents a kg at the close of the market last week, down 0.50 cents from the previous week.
SMR20 rubber for June buyer was quoted at 262.50 cents a kg, up three cents. Traders said SMR CV was offered at 273 cents, SMR L at 309 cents, SMR 5 at 273 cents, SMR 10 at 263 cents and drum latex at 230 cents.
The dealers said supply of raw materials in Malaysia remained stable, despite persistent rains in the last two weeks.