Thai rubber prices upside limited as RI stays cheap

Thai rubber prices upside limited as RI stays cheap

SINGAPORE (Reuters): Thai rubber prices are unlikely to climb further despite talk of tight raw material supply as buyers are reluctant to chase rates up in view of low-priced offers from Indonesia, traders said on Monday.

They said Thai benchmark RSS3 sheet rubber was offered at 62 U.S. cents per kilo for August, compared with 60 cents a week ago, as raw material prices rose after a brief decline.

It was seen last traded at 61.50 cents on Friday.

"Prices for RSS3 are unlikely to drop in the near future," said a trader. "But you'd need buyers to push them up further. It's doubtful if buyers would follow through. Thai rubber is already the most expensive available."

Traders said rains, coupled with a sharp rebound in Tokyo futures ahead of the June expiry on Monday, pushed up prices for unsmoked rubber sheet (USS3) towards 25 baht (55.3 U.S. cents) per kilo and above from around 24 baht (53.1 cents) last week.

Last month, USS3 hit 27 baht -- its highest level since July 1998 -- before easing some 10 days ago.

Traders are not certain if the raw material supply was really tight again, or if farmers and middlemen were holding back USS3, encouraged by Tokyo futures and ahead of Bangkok's decision on the government intervention scheme expected later this week.

They said there was market talk the government would raise the intervention price from 24 baht now, in view of recent high raw materials prices.

The Thai cabinet is to discuss whether it should extend the scheme, set to expire at the end of the week.

"It is one indicator for the prices," said another trader. "We could not get raw materials at prices below 24 baht even when raw materials prices eased."

Traders said buyers, including tyre makers and China, were turning to Indonesia as it offered SIR20 at 23 U.S. cents per pound -- 50.70 cents per kilo -- or slightly below for August.

"Both tyre makers and dealers are very keen at prices below 23 cents," said the second trader. "Also China is a regular buyer of SIR20."

Traders said major tyre makers were covering their needs for the last quarter of this year in addition to purchases agreed under term contracts.

Such buying helped firm up SIR20 prices, which hit fresh 30- year lows of around 21.50 cents in April, but raw material prices in Indonesia remained low, they said.

The traders saw China placing orders unabated in Indonesia despite its agreement with Bangkok to buy 50,000 tonnes from Thailand in a government-to-government deal.

Chinese customs data showed last week that the country imported 340,000 tonnes of natural rubber during the first five months of this year, up 15.6 percent on the year. Its imports totaled 70,000 tonnes in May alone.