Southeast Asian rubber prices seen rising

Southeast Asian rubber prices seen rising

SINGAPORE (Reuter): Southeast Asian rubber prices are expected to push higher through mid-December on a resurgence in strong consumer demand, which late last week ended a short downward correction in the market, regional traders said yesterday.

Malaysian traders said they expected more inquiries from consumers this week, due to low stocks, and added that this should underpin prices.

"We expect more inquiries as prices have taken an upward turn after a week-long correction," one trader said.

"Consumers feel that if they don't buy now it will be too late as prices are starting to move up again."

"We are positive that prices will rally as expectations of more rains could tighten supply right through until early next year," a dealer at a Malaysian plantation firm said.

Malaysia's Meteorological Department said that current monsoon rains will continue into the middle of next month in Peninsular Malaysia. The wet spell is attributed to strong northeasterly winds blowing out of Siberia and China. These winds are seen continuing until March.

Some consumers have also yet to finish their buying program for the year, dealers said.

"There are so many inquiries from everywhere but supply is running low," the plantation firm dealer said. "We are worried that we might not meet deliveries on time."

Some producers have already delayed late November/early December shipments to the second-half of December and January.

"A lot of inquiries have come from the Far East, Middle East and U.S. for SMR CV, SMR 10 and 20 and RSS3 rubber," one broker said.

SMR CV rubber was indicated around 470 Malaysian cents a kg, SMR 10 at 425 cents and SMR 20 at 420 cents on Friday.

Uncertainties

Apart from Malaysia, European dealers are also aggressively inquiring in Thailand and Indonesia for forward latex rubber, traders in Kuala Lumpur said.

"Due to uncertainties over stock levels during the first half next year, suppliers are quoting relatively high prices for forward drum latex at between 360-365 cents (a kg)," one said.

"We will also be in the lean period where latex supply is minimal due to the onset of wintering," he added.

Yesterday, January RSS 1 (Ribbed Smoked Sheet) buyer was quoted at 427 Malaysian cents a kg against 424 cents a week ago. January SMR 20 buyer was 424 cents versus 422.50.

Indonesian traders said rubber prices are likely to remain volatile this week, with sharp fluctuation in prices as supply remains tight due to continued monsoon rains and as demand appears unpredictable.

"Prices are likely to remain volatile and supply will stay tight in most of the rubber producing regions in the country," one dealer in the North Sumatran city of Medan said.

Tire-grade SIR20 rubber fell some four to five cents within a few days to 70-71.00 U.S. cents/lb recently, but it rebounded to 75.00-76.00 late last week on talk of possible large purchases for December/January shipment from China.

Dealers said the rebound had taken them by surprise, as demand had suddenly picked up in the last few days, while supply remained tight -- forcing them to cover short positions.

Singapore traders said on Friday that China had made some buying inquiries, but failed to attract sellers as their bids were too low. They dismissed reports that China would buy as much as 100,000 tons of Indonesian December/January SIR20.

"It makes no sense. China's usual requirement is between 35,000 and 40,000 tons (a month)," one trader said.

In Thailand, rubber prices began last week steadily, but then followed Japanese prices higher later in the week despite good supplies coming on to the market, traders said.

Benchmark February-March RSS3 firmed to around US$1.69 a kg on Friday from $1.60 late the previous week. Prices rose further to above $1.70 yesterday.

"The fundamental side has improved, supplies are good but prices rebounded on Thursday and Friday in line with Tokyo," one trader said.

Japanese buyers were most active last week, traders said.

Thai prices are expected to continue firming this week, following Japanese futures prices which are expected to head higher, and could reach resistance around $1.70-$1.80/kg before easing back, traders said.