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.