Asian rubber futures outlook unfavourable - IRCo

ERJ staff report (RPN)

Bangkok - Asian rubber settled mixed Thursday with a little upside on some exchanges due to bargain hunting after losses earlier this week. Persistent global macroeconomic concerns capped any upside, however, with Malaysian trade participants saying that the commodity's outlook is unfavourable.

The previous benchmark December natural rubber contract on the Tokyo Commodity Exchange settled 0.3 percent higher at Y227.6 a kilogram, while the new benchmark January contract opened at Y230.2/kg and settled at Y229.6/kg.

An International Tripartite Rubber Council meeting last week concluded that global supply and demand remain steady, IRCo (International Rubber Consortium) chief secretary Yium Tavarolit said in a 26 July news release.

"Global natural rubber stock is still lower than [usual], and current natural rubber prices are competitive with synthetic rubber prices," he said, but added that global economic uncertainty is having an impact on the industry.

Supply concerns provided support, with frequent rainfall in south Thailand limiting tapping, a Bangkok-based trader said. "The Rubber Estate Organization has also been buying up rubber every day" as part of the government's intervention plan, he added.

A major natural rubber exporter in Malaysia said Thailand's attempt to support prices faces headwinds due to competition from other regional grades.

"While we understand why Thailand is doing rubber intervention, it is not really easy to 'control' market prices, even though it is politically favourable to do so," he said, noting that Thailand only accounts for 30 percent of global rubber production, meaning rubber from rival origins is available even if the Thai government hangs on to stocks it purchases.

"The sad truth is rubber consumption isn't robust, particularly in the auto market...hence the intervention scheme isn't working," he said.

Vietnam, exported 85 000 tonnes of the commodity in July, up 42 percent from June and 6.3 percent from a year earlier, data from the government's General Statistics Office showed Thursday. In the year to date, Vietnam has increased its export volume by 32 percent, the data showed.

Physical rubber prices rose, taking cues Tocom. Thai traders said trade was slow, as bids were coming in too low, with some well below the cost price.

Natural latex prices will fall further in the next few months as supplies from the three major producing countries--Thailand, Indonesia and Malaysia, which account for around 70 percent of global exports--remain ample even as Chinese demand for rubber weakens, Lim Wee Chai, chairman of Top Glove Corp. Bhd., said Thursday. Natural latex prices will be about $1.50-$1.80/kg for the next few months, said Lim.

The forecast represents a 10 percent-25 percent drop from the current spot price of around $2.00/kg for free-on-board Thai latex.

This is an external link and should open in a new window. If the window does not appear, please check your pop-up blocking software. ERJ is not responsible for the content of external sites.

Press release from IRCo