Thai, Indonesian and Malaysian rubber grades have been traded at record prices well above $3 a kg as tyremakers scramble to buy the commodity because of tight supplies, dealers said on Tuesday.
Thai RSS3 changed hands around $3.50 a kg late last week, Indonesia’s SIR20 was sold late on Monday at 1.50 to 1.51 U.S. cents per pound, while SMR20 was traded at between $3.365 and $3.405 a kg for nearby shipment, they told Reuters.
There were no details on the quantity but some dealers said Bridgestone, Japan’s largest tyremaker, appeared to be only one willing to buy RSS3 at such high prices.
Cash rubber prices have gone up more than 20% in 2010 as rising oil prices pushed up Tokyo rubber futures and the dry wintering season in Thailand, Indonesia and Malaysia curbed supplies of raw material. Soaring prices scared off buyers in China but dealers said the world’s largest consumer would turn to the physical market soon because of falling domestic inventories. “They still have stocks in bonded warehouses, so they buy from the domestic market first,” said a physical dealer in Singapore.
“But there are no rubber trees in the warehouses, so sooner or later they will have to buy. You can’t forever depend on the warehouses,” he added.
Deliverable rubber inventories in warehouses monitored by The Shanghai Futures Exchange fell 15% on 2 April from a week earlier.
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China’s rubber stocks have seen a steady decline since February after some local tyremakers shunned the physical market in Southeast Asia and turned to the warehouses for supplies, especially for RSS3 which was offered as high as $3.65 a kg.
China also turned backs on the Indonesian grade, which was still the cheapest on offer in Southeast Asia.
“The price of SIR20 has already surpassed a high of $1.48 a pound in 2008. I don’t know how much higher the price will be, but China is not in the Indonesian market yet,” said a dealer in the main growing island of Sumatra.
“I think we need to watch out for possible defaults in Thailand because of the difficulties in getting raw material during the wintering season,” he added.
Thai rubber production may be only 3m tonnes in 2010, the president of the Thai Rubber Association said last month, cutting his forecast from the 3.15m tonnes made in January due to severe drought.
Rubber supply has been falling gradually since late February as Thailand is in the dry season, when rubber trees shed their leaves and stop producing latex.