Malaysia Rubber-China gets bargains; wintering in Sumatra

September 25, 2011

SINGAPORE – Main rubber consumer China was chasing more tyre grade from Thailand after improving supply prompted sellers to cut prices, but Indonesia was a bit cautious during the dry wintering season, dealers said Wednesday.

Wintering has started in the southern part of Indonesia’s main growing island of Sumatra, when rubber trees shed their leaves and latex output slows. An unspecified quantity of SIR20 changed hands at $4.59 kg for October, free on board.

‘Trading has resumed after the Eid al-Fitr holiday. There were deals last night at 208.50 cents a pound but we didn’t see many sellers because of wintering,’ said a dealer in Sumatra.

‘Bridgestone bought the rubber,’ said the dealer, referring to the world’s largest tyre maker.

SIR20 had also been offered at 208.75 and 209 U.S. cents a pound, with no deals reported.

Trading has picked up in Indonesia after the Muslim Eid al-Fitr celebration early last week, when they were deals at 214 cents a pound. Indonesia, the world’s second-largest rubber producer after Thailand, is also the world’s most populous Muslim nation.

Thai dealers said China purchased STR20 at $4.70 to $4.72 including freight late on Tuesday, which suggested that some sellers were now willing to strike deals at bargain prices. Thai grades were sold at up to $4.78 CIF last week.

On Wednesday, STR20 and another tyre grade RSS3 were also offered at around $4.70 a kg but without freight charges. The RSS3, often considered the benchmark for physical prices, hit a record $6.40 a kg in February.

‘Lower production costs now allow Thai sellers to offer STR20 at prices closer to Indonesian and Malaysian grades, but we didn’t see any interest from tyre makers such as Bridgestone yet,’ said a dealer in Thailand’s southern city of Hat Yai.

‘The weather has been good for a number of days in southern Thailand. It is still wet occasionally in the northern part,’ said the dealer, adding that supply was ample in Thailand.

A drop in latex prices indicated an improving supply in Thailand, where 60-percent latex was offered at $2,900 a tonne in drums, down from $3,000 last week and $3,250 in early 2011.

China, which accounts for 35 percent of global demand, has been rebuilding its inventory since July after turning to its domestic stocks earlier this year because of high physical prices in Southeast Asia.

Rubber inventories in warehouses monitored by the Shanghai Futures Exchange rose 13.5 percent to 29,818 tonnes last week. China imported around 1 million tonnes of natural rubber in January to July this year, up 2.11 percent.

Malaysian SMR20 changed hands at $4.70 and $4.71, free on board.

‘People say the weather is good in Thailand, so that’s why they can offer good prices. China is buying and they even try to buy more from us,’ said a dealer in Singapore.

‘I think their stocks are still low, so they want more. This is actual demand. Crude oil is also higher, so this is part of the reason why they are buying.’

Weekahead

Dealers expected Chinese demand to step up purchases next week on worries that prices could still rise on the back of gains on Tokyo futures, which set the tone for physical prices.

The benchmark rubber contract on the Tokyo Commodity Exchange for February delivery added 9.4 yen a kg to 365.7 yen on Wednesday – coming off a two-week low the day before because of a rebound in oil and a weaker yen.


Source: XE

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