Chinese consumers bid for prompt rubber shipments at below $2 a kg this week, but some sellers held back their cargoes because of the low prices and difficulties in getting raw material, dealers said on Wednesday.
The dry season, which curbs output in Thailand, Indonesia and Malaysia, has failed to support tyre grade prices, with rubber futures in Tokyo and Singapore holding near multi-year lows on fears about economic growth in top consumer China.
On Singapore’s SICOM exchange, the TSR20 contract – which covers the Thai, Indonesian and Malaysian grades – was close to its weakest level since 2009. Tokyo rubber futures have fallen more than 18 percent this year.
Thai RSS3 grade was said to have traded at $2.22 to $2.23 a kg not including freight, late on Tuesday, but many dealers couldn’t confirm the deals.
Another Thai grade, STR20, was said to have changed hands at $1.90 to $1.92 a kg including freight to China.
“Most people would like to sell RSS3 at $2.30 a kg. For STR20, I don’t think you should sell it below $2, otherwise you will lose money,” said a dealer in Kuala Lumpur.
“The break even price for STR20 is about $2.02 FOB,” the dealer said.
While some Chinese buyers may want to buy on dips, overall demand is still weak due to the high inventory in warehouses monitored by the Shanghai Futures Exchange and rising stocks at bonded warehouses in Qingdao.
“There are a lot of inquiries from China, but their bids are in the range of $1.90 to $1.92 CIF. Major tyre makers are also quite reserved in the last few days,” said the dealer, referring to Bridgestone Corp and Michelin.
Indonesia’s SIR20 was traded at $1.83 to $1.84 a kg for June delivery without freight, down from $1.95 last week.
Malaysia’s SMR20 for June was sold at $1.91 a kg including freight to China.
“It’s a dull week. We don’t want to sell because the price of raw material is still high. We will lose money,” said a dealer on Indonesia’s main growing island of Sumatra.
Raw material prices were steady at 19,500 rupiah a kg ($1.72 a kg), and some dealers argued that they had to sell SIR20 at least at $1.85 to cover costs.
WEEK AHEAD
Prices could be under pressure next week as main producer Thailand plans to sell 200,000 tonnes of rubber from state inventory to replace lost output as farmers stop tapping trees during the dry season.