Asian rubber producers were reluctant to sell this week because of depressed prices and interest centred on the sale of rubber stockpiles by top producer and exporter Thailand.
The stockpiles have been hanging over the market at a time when global prices are already low because of weak demand.
China’s Hainan Rubber Industry Group said this week it had signed an agreement to buy 208,000 tonnes of rubber from Thailand’s Rubber Estate Organisation, which oversees the stockpiles.
The firm said the purchases would be made at a “fair market price” but traders suspect the rubber was probably sold at a discount.
“Market players are still evaluating the impact of the deal, particularly to see what prices the rubber was sold at,” said a Bangkok-based trader, adding that a discounted deal could hurt prices.
A source from Thailand’s agriculture ministry said the sale included some top-grade 100 percent rubber priced at around $1,900 per tonne, with lower-quality grades sold for less.
The top-grade price is equivalent to $1.90 per kg.
Benchmark Japanese futures, based on RSS3 grade, are trading at around 200 yen ($1.69) per kg.
The benchmark has fallen nearly 30 percent this year and is trading not far above five-year lows hit last month amid a supply glut.
Last week Thailand, Indonesia and Malaysia, which produce nearly 70 percent of the world’s natural rubber, agreed to control exports to international markets to curb excess supply.
Elsewhere in physical markets, top tyre maker Bridgestone Corp bought Indonesian grade SIR20 at 69.75 cents per pound ($1.54 per kg) for February shipment in dealer-to-dealer trades.
Trading activity continued to be hurt by producers’ reluctance to sell at lower prices.
“Indonesian prices are 3-4 cents higher than (Singapore’s) SICOM prices and still producers cannot make a profit,” said a Jakarta-based trader, adding that producers were asking for $1.58-$1.59 per kg.
Due to weak prices, many farmers have abandoned tapping to look for other jobs, leading to a shortage of raw material and delays in deliveries.
Thai-grade STR20 was offered at $1.54-$1.55 per kg, compared with $1.52-$1.57 last week, traders said. RSS3, another Thai grade, was offered at about $1.61 versus $1.62-$1.65 last week.
“We saw the market mostly trading sideways in the past two weeks with good consumer buying at $1.50 and below, while producers are selling around the $1.55-$1.60 area,” said a Singapore-based trader.