Weak ringgit boosts Malaysian rubber

Weak ringgit boosts Malaysian rubber

SINGAPORE (Reuter): Malaysian rubber producers will get a boost from a falling ringgit, but the rest of the Southeast Asian rubber market will probably remain weak due to ample supplies, dealers said yesterday.

"I think the market will sustain its rise with SMR 20 seen trading above 265 Malaysian cents if (the) ringgit softens further," a senior dealer at a trading house in Malaysia said.

The ringgit fell to an all-time low of 3.06 to the U.S. dollar at 0040 GMT after Prime Minister Mahathir Mohamad suggested that currency trading be banned.

The Malaysians were also expecting a return of European consumer interest after the summer holiday season.

"With expectations that the Europeans will place fresh buying orders, there is a tendency for the market to shoot up," a dealer said. "Factories need the stock to resume their operations."

Their sentiment was shared by dealers in Thailand, the world's biggest producer of rubber. "We expect more buying interest next week. Buyers were sidelined awaiting prices to come down," a trader in Thailand said.

Dealers in Kuala Lumpur said monsoon rains in southern Thailand and northern Malaysia may also pinch supplies and help prices.

"This could prompt covering," one said.

But rubber traders in Singapore and Indonesia were skeptical, saying the continued absence of strong buying by well-covered consumers would keep prices and trading flat.

"The fundamental of too much nearby rubber has not changed. We're in for another bad week," a senior dealer for a rubber house in Singapore said.

Another veteran dealer said Thailand may be under renewed pressure to sell off its rubber stocks.

"I think the IMF (International Monetary Fund) is going to put pressure on them. The whole economic management (strategy) will be questioned," he said.

Bangkok said earlier it had no plans to sell its 110,000 tonnes in excess rubber stocks and even said it planned to spend an additional one billion baht on propping up rubber prices.

"We expect prices to soften further next week because of a lack of fresh factors. Buyers, of course, want prices to continue falling," a dealer in Indonesia said.

Traders said demand for the benchmark tire-grade SIR20 remained poor in trading late last week.

"Demand is very thin and most buyers only want to get involved in forward shipments," a trader said. "The problem is we still have stocks for nearby shipments."

Malaysian dealers said the other long-term concern for the trade would be the impact on production caused by the smog from forest fires in Indonesia which has enveloped the region in a gray cloud.

Prices of Thailand's key November RSS3 was quoted around 87.00 U.S. cents per kg FOB Bangkok while January/February shipments were quoted at 95.00-96.00 cents a kg.

Malaysia's benchmark October RSS1 buyer closed on Friday at 260.50 Malaysian cents a kg, up four cents from the previous week, and October SMR 20 buyer was up three cents at 260.

Indonesian traders said offer prices for October shipment of SIR20 was quoted at 39.75 cents FOB Padang, 40.25 cents FOB Palembang for December shipment and 40.00 cents FOB Medan for November.