Thai, Malaysian grades sold above floor price, but Indonesia ignores

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Thai, Malaysian grades sold above floor price, but Indonesia ignores

KUALA LUMPUR (Oct 15): Thai and Malaysian tyre-grade rubber were sold this week at above a proposed industry price floor, while Indonesian sellers unloaded more cargoes to top tyre makers Bridgestone and Goodyear at lower rates, traders said.

Rubber trade associations from Thailand, Malaysia, Indonesia, Vietnam and Cambodia earlier agreed to urge members not to sell rubber at below $1.50 per kilogram in a bid to lift prices that have plunged to a five-year low.

The $1.50-per-kg level is already below the production cost of many growers, although some - including those in No. 2 producer Indonesia - continue to sell below the prescribed floor in order to raise cash in a market hit hard by a supply glut.

"There's sort of a virtual agreement to follow the advice by the rubber associations who are trying to keep rubber above $1.50," said a dealer in Kuala Lumpur. "But there's no binding agreement. No one can sign that kind of agreement because no one has the authority or right to do that."

A Thai dealer said despite the collective recommendation by the five rubber associations, "eventually, it's still the market forces that will dictate the price levels".

Indonesian SIR20, a key rubber grade used by tyre makers, was sold between $1.48 and $1.49 per kg for December delivery to Bridgestone, Goodyear and a Japanese buyer, traders said.

"GAPKINDO's letter and proposal did have a market impact and market prices stabilized, but I thought it was more the low prices that attracted the buyers," said a Singapore-based dealer, referring to Indonesia's main rubber group.

The Indonesian grade is usually the cheapest in Southeast Asia. Some dealers said prices may pick up to $1.50 and above if market sentiment improves.

Malaysia's SMR20 grade changed hands at $1.52-$1.53 per kg on free-on-board basis and Thailand's RSS3 grade was sold between $1.60 and $1.62 for December shipment, dealers said.

There were no reports of deals for the Thai STR20 grade, which was being offered at $1.56-$1.57 per kg including freight.

Rubber futures in Singapore, which many in the region consider as benchmark along with those traded in Japan, remained below $1.50 since breaching that level in late September.

Front-month rubber on the Singapore Exchange was at 148.70 U.S. cents per kg on Wednesday, off this month's trough of $137.40 which was its weakest since April 2009.


Members of the Association of Natural Rubber Producing Countries, which together account for more than 90 percent of global natural rubber output, met in Kuala Lumpur on Monday but they did not appear any closer to coming up with a more drastic measure to shore up prices than the minimum-price plan.

Malaysia is planning to boost rubber consumption at home by constructing rubberised roads from next year.

Top rubber producer Thailand, which announced similar plans earlier this year to use rubber for roads, pavements and reservoirs, uses 3.3 tonnes of natural rubber for every 1 kilometer of road.

Thailand's rubber output is seen dropping this year, versus earlier expectations for a rise, as plummeting prices drive away tappers and heavy rains slow harvesting.

An official with the Thai Rubber Association said production will unlikely even reach 3.8 million tonnes in 2014, compared to the 4.2 million tonnes churned out last year.

"Lower production will definitely support the market," the Thai-based dealer said.

"If supply has reduced, it will help balance out the surplus in the past, then eventually prices will adjust." (1 US dollar = 107.3600 Japanese yen)