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Asia Rubber-TOCOM pulls up mkt, Indonesia attracts

SINGAPORE: Southeast Asian physical rubber prices are likely to rise further, led by futures prices in Tokyo in the wake of speculative buying after Japanese central bank foreign exchange intervention, traders said on Monday.

"A lot of dealers are coming in to pick up SIR20," said a trader. "It's still worthwhile that you buy that (SIR20) and sell RSS3 or Japan. They're nice differentials."

Traders said buyers were turning to Indonesia because SIR was the cheapest, with offers seen at 29 US cents/lb for July and 30 cents for August, FOB Palembang. There was talk of tightening raw materials supply in Indonesia, but aggressive selling capped price increases over the past week.

The rebound in prices for Thai and Malaysian followed a slide over the past several weeks, they said.

"There's a lot of demand and a lot of supply," said another trader, referring to Indonesia. "But now we have wintering in Indonesia. Although rubber is traded low, supply is getting tight."

In hopes of further price increases, suppliers in Thailand seemed to be holding back stocks, pushing up prices to 67-68 US cents/kg for May and 69 cents for June shipments, traders said.

Some traders said Malaysian was also firm at around 67 cents/kg as rains cut raw material supplies to 25-30 percent of usual levels. All eyes were on TOCOM, which bounced strongly and pulled up physical rubber prices early on Monday.

The move came amid Bank of Japan intervention to curb the yen's gains against the dollar, which triggered buying of yen-denominated rubber contracts by individual speculators, traders said.

They were watching whether large consumers, such as tyre makers, would place sizable orders following their return to the market last week after an absence since the Lunar New Year holidays in February.

Many were seen covered for nearby positions, including some needs for August and September, but some last week were buying distant months as far as the first quarter of next year.

Traders said this helped rubber prices to turnaround, which many described as a technical correction after a long decline.

"A lot depends on whether consumers are getting aggressive," said a third trader. "Buyers have been buying really forward months. They are not really aggressive. Some consumers are picking up here and there next year January and March."

The first trader added: "They don't seem to be in particular hurry at moment. There might be a bit of a run, but I don't think it will last too long because of the sheer weight of rubber around. We'll see proper supply after a while."-Reuters