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.