Singapore (march 29, 2011) : a few cargoes of thai, indonesia and malaysian tyre grade changed hands at around $5 a kg, but main buyer china turned to domestic inventory, which was being offered at discounted prices, dealers said on monday.
prices of tyre grade have dropped more than 12 percent since striking a record above $6 in february, as economic concerns triggered by the unrest in the middle east and worries about the impact of a deadly earthquake in japan on demand spurred selling on the tokyo commodity exchange.
although floods in main producer thailand and the dry wintering season in indonesia and malaysia could offer support, a lack of buying interest from china as well as volatile futures were a cause of concern. "china has been quiet. i understand local dealers are selling rubber at discounted levels," said a dealer in singapore, who trades indonesian grade.
"in thailand, supply of raw material is down because of wintering and flooding. but we understand this market is fund driven. they are powerful enough to keep driving the market down. it’s a very strange market." the new benchmark september 2011 contract on tocom was at 407.3 yen a kg by 0633 gmt, having started trading at 436 yen. the contract, which debuted on monday, was well below a lifetime high around 535 yen struck in february.
all japanese automakers have suspended or slowed vehicle and parts production since the march 11 earthquake off japan’s north-eastern coast caused hundreds of suppliers’ factories to shut down. deutsche securities slashed its forecast for toyota motor corp’s operating profit for next business year by 84 percent and cut its forecasts for other japanese automakers assuming a prolonged production suspension after japan’s biggest earthquake on record.
indonesian sir20 grade was traded late on friday at $5.12 to $5.13 a kg for april shipment. there were no deals on monday and dealers were expected to slash the offer prices later in the day as tokyo futures tumbled. thai rss3 for may delivery was done at $5.66 a kg, down from a lifetime high at $6.40 seen in february.
malaysian smr20 was traded at $5.30 for april. "china is not around. they can get cheaper rubber at the domestic market at a discount of 15 to 20 cents to the physical prices in southeast asia," said a dealer in thailand’s southern city of hat yai. "the weather is a bit erratic this year. some areas were flooded over the weekend," said the dealer, adding that there were no reports of damage. rubber inventories in warehouses monitored by the shanghai futures exchange fell 20.9 percent to 33,198 tonnes last week as local tyre makers used up domestic stocks.
weekahead dealers expected purchases from tyre makers in europe and the united states to offset a slowdown in demand from china, but declines on tokyo futures could weigh on sentiment. "china can buy cheaper rubber locally. we don’t expect to sell anything to them," said another dealer in singapore.
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