SICOM changes rubber terms

SICOM changes rubber terms

SINGAPORE (AFP): The Singapore Commodity Exchange (SICOM)
announced yesterday changes in the delivery terms of the most
popular rubber futures contract, TSR20.

The contract's denomination was also changed to U.S. dollars
from Singapore dollars. TSR stands for Indonesian-produced
Technically Specified Rubber.

SICOM said it would introduce an October-December TSR20
contract from Nov. 1 for trading on FOB (freight-on-board) terms
instead of the current award terms under which delivery to
designated Singapore warehouses is specified.

The existing TSR20 (award) contract will be traded until the
July-September contract months, and then phased out.

AN FOB contract would remove the need for transport and
handling of rubber shipments to Singapore from Indonesia, where
TSR 20 is produced, a SICOM official said.

A seller would deliver the rubber to a buyer instead of having
to first bring it to warehouses here for prior inspection and
certification by SICOM officials.

"The TSR20 (FOB) contract will provide tremendous cost savings
for traders, " a SICOM statement said. "With the better and more
consistent quality of TSR20 produced these days, there is no
longer any need to inspect and test every lot of TSR20 as is
stipulated in the award system."

SICOM said its members would enjoy a 10-percent concessionary
tax for income derived from trading in TSR20 (FOB) contracts.

International users will have the convenience of trading in
U.S. dollars instead of Singapore dollars.

Hedging will become easier as the physical trade is conducted
in the U.S. currency, removing foreign-exchange risks, the
exchange said.

TSR20 is mainly bought by American and European tire
manufacturers. The volume of rubber traded under the contract
last year surged 57 percent over 1994 to 828,780 tons.

TSR20 consumption is expected to grow, given the tire
industry's preference for natural over synthetic rubber, SICOM
said.