Bridgestone snaps up SIR20; high inventory hits prices
Tokyo – Bridgestone Corp bought Indonesian rubber this week and few cargoes of Malaysian grade were sold among trading houses, but Thai sellers waited for prices to improve, dealers said today.
According to Reuters the TSR20 contract on Singapore's SICOM exchange, which covers Thai, Indonesian and Malaysian grades, is still near a five-year low amid worries of an economic slowdown in China, the world's top rubber consumer.
Oversupply also dragged on prices, with benchmark Tokyo rubber futures, which set the tone for physical rates, on course for a second straight monthly decline.
Global supply is forecast to exceed demand by 241,000 tonnes in 2014 for, a fourth straight year of glut, according to the International Rubber Study Group, which rules out any near-term rebound in prices.
Indonesia's SIR20 was sold to Bridgestone at $1.69 (€1.24) a kg for August/September delivery, dealers close to the transaction said. There was no inquiry for prompt shipment, which suggested that buyers were either well-stocked or waiting for cheaper prices.
"Prices are so low, so there are no incentives for tappers. Rubber processors in Indonesia have no margins at all and they are trying to cut production," said a dealer in Singapore, who trades Indonesia and Malaysian grades. "For those who have committed contracts, of course they have to process rubber and deliver goods in time. It's a very lousy market."
Malaysia's SMR20 was traded at between $1.70 and $1.78 a kg for July delivery. Thai STR20 was offered at $1.80 a kg while another grade, RSS3, was quoted at $2.06 to as high as $2.15 a kg with no reports of deals.
China was absent from the physical market due to high inventory in bonded warehouses in Qingdao, estimated by dealers at around 362,000 tonnes, up from 290,000 tonnes in January. Stocks in Shanghai stood at 159,270 tonnes.
In addition to the high stocks in China, the physical market was also under pressure from Thailand's plan to sell 200,000 tonnes of state rubber stocks, although a political crisis in the world's top producer was likely to delay the sale.
"Thai sellers are trying to maintain the prices. We haven't heard of much trade recently. They are still into June and July delivery because rubber is available at the moment," said a dealer in Kuala Lumpur.
Tire grade prices could fall next week unless consumers decide to stock up to take advantage of the low prices.
A slump in natural rubber prices to multi-year lows is spurring Southeast Asian farmers to turn to other crops and tappers to look for other jobs, potentially chipping away at a chronic supply overhang.