Rubber prices set to rise further

16/01/2010

Malaysian rubber prices are expected to rise further next week amid concern over tight supply of the commodity, dealers said.

"Supply shortages are still a major issue and this would continue to push prices up," said one of them.

According to a report by the Association of Natural Rubber Producing Countries, the eight largest producers -- Thailand, Indonesia, Malaysia, India, Vietnam, China, Sri Lanka and Cambodia -- saw supply declining by 5.1 per cent in aggregate last year through October.

The biggest drop in output came from Malaysia, which produced 879,000 metric tonnes, a 20.6 per cent drop compared with 1.07 million tonnes in 2008.

Supply was expected to decrease again during the wintering dry season, starting late February to mid-April.

Another dealer said there was still room for local rubber prices to move further up as they were still considered cheap compared with those in some regional markets like Thailand, Indonesia and Singapore that had already surpassed 1,200 sen per kg.

The SMR 20 price had exceeded 1,000 sen per kg this week. The highest level seen was in July 2008 when the price touched 1,051 sen per kg due to tight supply and uncertain weather conditions.

According to reports, Malaysia, Thailand and Indonesia are scheduled to hold a ministerial meeting on Jan 17-19 to seek ways to stabilise prices.

The top three producers had cut exports to balance prices before, namely after it hit a 56-year peak of US$3.25 a kg in July 2008 but then dropped to US$1.10 a kg five months later.

As prices recovered in 2009, little was done to restrict exports.

"Just wait and see what will be the outcome from the meeting," said a dealer.

On a Friday-to-Friday basis, the Malaysian Rubber Board official physical price for tyre-grade SMR 20 jumped 20.5 sen to 1,011.50 sen per kg from 992.00 sen per kg.

Latex in bulk climbed 23 sen to 660.50 sen per kg from 637.50 sen per kg previously.

The unofficial sellers' 5pm price for SMR 20 shored up 19 sen to 1,011.50 sen per kg from 992.50 sen per kg while latex in bulk surged 28 sen to 666.50 sen per kg from 638.50 sen per kg previously. -- Bernama