960422

Asian rubber markets

seen mixed ahead

of holidays

SINGAPORE: Southeast Asian rubber markets could trade quietly mixed this week on a lack of fresh incentives and ahead of holidays in the region and in Japan.

Traders said on Monday the markets were likely to shrug off weekend news that the United States could ink a new global rubber pact ahead of an International Natural Rubber Organisation (INRO) meeting in Kuala Lumpur this week.

Separately, earlier news that the Thai government has reserved one billion baht to be used to intervene in the Thai market and keep smallholders happy with remunerative prices was seen as neutral and had no immediate impact.

"The Thais said they would intervene if unsmoked sheet rubber prices fall below 25 baht a kg," said an analyst at an international firm. "Prices are now so far away from the level."

INRO, which began a week-long regular meeting in Kuala Lumpur on Monday, is charged with market intervention to stabilise prices through the International Rubber Agreement (INRA), but it has not been able to act in recent months because INRA's existence has not been extended after its earlier term lapsed last December.

News that the U.S., the world's top rubber consumer, would sign the rubber pact was seen as supportive. But traders said they had ruled out any immediate intervention by the group to sell or buy rubber to stabilise prices.

One Singapore trader said pending other supportive news, the market could continue to drift lower in the coming weeks on a dearth of demand and rising origin supplies after the end of the wintering period. During wintering rubber trees shed their leaves and latex flow slows.

Malaysian and Singapore markets will be closed on April 29 and May 1 for local holidays, Indonesia on April 29, Thailand on May 1 and Japan for the Golden Week holidays from April 29.

"Everybody was waiting for China to pull the market up but it has so far failed to emerge. There were no other big buyers, with India and Russia sitting out, and the Europeans buying just to keep their plants running," he said. He expects RSS1 prices to fall to 132 U.S. cents a kg by July from 139 cents currently.

But traders in Malaysia take an opposite view and expect prices to recover on an upward technical correction.

"Buying interest is slowly returning to the market on the perception that the market has nearly bottomed out," one said.

Indonesian prices could move narrowly this week, weighed down by worries of rising supply and talk U.S. buyers were postponing rubber shipments, dealers said.

"The U.S. is our most important market. Rumours that some U.S. buyers had postponed shipments due to high tyre stock worried us," one dealer in Medan said. Traders see SIR20 prices remaining in a range of 57-59 U.S. cents a lb this week.

I don't think they will go further down. They must reached bottom. Selling SIR20 at 57.00 cents for example is actually not profitable," one said.

Latex dealers said the market was expected to remain slow, with few fresh contracts seen and prices were likely to stay between 2,500 to 2,600 rupiah a kg.

Thai rubber stood steady to slightly firmer last week in line with marginal rallies on Japan's Kobe rubber futures market, and with most buyers were sidelined waiting for prices to ease, traders said. Most exporters expect prices to remain stable this week despite an approaching end of the Thai wintering season at the end of this month.

"We have not seen any serious seasonal price rally during this year's wintering as local traders provided the market with steady supply from their stocks," a major trader said.

Thai benchmark May/early June RSS3 hovered at 139-140 U.S. cents a kg FOB Bangkok on Friday against 138-139 a week ago.

"We have not seen any Chinese orders of more than 500-600 tonnes since early April," an exporter said. "The only thing to prod Chinese buyers to enter the market would be a sudden price surge which would give them a big jolt."-Reuter