Unrelieved woes hits SE Asia rubber trade
Unrelieved woes hits SE Asia rubber trade
SINGAPORE (Reuter): Anemic regional currencies and the daunting prospect Bangkok may sell-off its excess rubber stocks will keep the rubber trade in Southeast Asia mired in a bearish rut, traders said yesterday.
"Where's the good news? The market is teetering on a precipice," a senior dealer for a commodity house in Singapore told Reuters. "It looks very weak."
"The currency situation is unambiguously bearish. The devaluation of the Thai baht unleashed a wave of selling. Now, the Indonesians are very keen sellers" after the flotation of the rupiah last week, he added.
The Malaysian ringgit has also taken a hit, completing the headcount of currencies of the world's biggest natural rubber producers which have been savaged by speculative attacks.
Combined with poor demand and fresh fears the Thai government will be forced to sell some of its 70,000 tons in rubber stocks, despite Bangkok's repeated denials it has any such plans, regional prices are in for another rough week.
"We are not happy about this at all," a trader from Thailand said. "I expect the price to move in a narrow range with a downward bias this week."
"The market seems convinced that the government is considering selling the stock. It could be just a matter of time," said a trader in the Thai rubber center of Hat Yai.
A trader in Singapore said talk of Thai stock sales "will haunt the market" this week.
"I'm sure they will eventually sell some of the stock and that would be bad for the market," the dealer said.
Thai dealers said Michelin and Marubeni of Japan bought modest amounts of RSS3 rubber last week, but China was absent.
The Thai benchmark RSS3 was indicated around 91.00-92.00 U.S. cents a kg FOB Bangkok for October shipment and 93.50 cents for January shipment on Friday.
In Indonesia, dealers moaned at the rupiah's troubles and scrambled for buyers who have practically disappeared.
"This market has been very gloomy. First, demand was very weak, and now the rupiah is in trouble. Buyers have anticipated prices will decline," said one trader in Palembang, Sumatra.
"Dealers are taking a wait-and-see position to await further developments in the currency market," said another trader. "We expect to see a clearer picture on what the currency is going to be this week. We also expect the market to be weak," he added.
Prices in Indonesia ended the week at 42.00 U.S. cents/lb FOB Palembang for October shipment and at 42.25 cents FOB Medan.
Offer prices were quoted at 43.00 cents FOB Medan for November shipment, 41.50 cents FOB Padang, Pontianak and Jambi for September shipment and 42.00 cents FOB Surabaya.
Some traders said they believe buyers would enter the market when prices drop to 40.00 U.S. cents.
"I think that...is a kind of resistance level in which buyers will have no choice but to buy rubber," said one trader.
In Malaysia, traders said local prices were held hostage to the volatility of the ringgit and the rupiah.
"We don't know what's happening with the ringgit or rupiah and I don't think our clients know very much either," said a trader in Kuala Lumpur.
He added: "Technically, the prices should adjust upwards this week if the ringgit falls again. But then again it might not."
Another trader said Malaysian rubber was among the most attractively priced in the region now after the recent fall of the ringgit.
"We have had some steady buying in the last couple of weeks from Australians and Koreans, among others," said the trader. "The volumes aren't great but it shows we are competitive."
Traders said the lower the currency, the greater the advantages were for Malaysian commodity exporters.
The benchmark RSS1 rubber for September buyer was priced at 250.50 Malaysian cents a kg at the close of the market last week, a rise of three cents from the previous week. SMR20 for September buyer was four cents higher at 250.
Trading houses were offering SMR 20 at 247 cents a kg, SMR CV at 289 cents, SMR L at 272, SMR 5 at 262, SMR 10 at 248 and drum latex at 190 cents.