Rubber price remains high on steady demand

  • Business
  • Thursday, 04 Sep 2008

It may spike in short term due to uncertainties in Thailand

PETALING JAYA: The price of rubber has managed to remain relatively steady despite a steep correction in prices of other commodities due to burgeoning demand.

An increase in the consumption of rubber as well as high prices of crude oil, which is used to make synthetic rubber, had pushed up natural rubber prices in recent months, experts said.

Synthetic rubber is a by-product of petroleum and its price moves in tandem with that of the commodity. It is a direct substitute for natural rubber in many products, including car tyres.

Standard Malaysian Rubber (SMR) 20, or tyre-grade rubber, reached RM10.52 per kg in July, the highest in at least a decade. At yesterday’s noon close of RM9.59 per kg, it was only about 9% off its high.

A visitor looks at rubber gloves during an exhibition in Kuala Lumpur recently. Rubber production in South-East Asia is likely to increase during August-September.

Latex in bulk, meanwhile, was RM6.07 per kg at noon.

The unofficial sellers’ closing price for tyre-grade SMR 20 declined five sen from the day earlier to 956.50 sen per kg while latex in bulk rose 1.5 sen to 608 sen per kg.

“Given the current uncertainties in Thailand, we think the price of rubber may spike in the short term although this has nothing to do with the supply-demand situation and, therefore, more speculative in nature,” an analyst said.

Thailand is the world’s biggest rubber producer, with an annual production of 3.1 million tonnes of natural rubber and supplies about 45% of latex to the Asian region.

Nothwistanding the Thailand issue, rubber prices should come down, moving forward, based on a few factors, the analyst said.

“Rubber production among major producers in South-East Asia is likely to increase during the August-September period,” he said.

In Thailand, production was now 30% higher than in late June, early July when prices had spiked, while Malaysia – the world’s third largest producer – was also entering its peak production season, he said.

The recent fall in oil prices is also expected to further soften demand for natural rubber, dragging prices lower. Oil prices have eased to below US$106 per barrel, more than 20% off the record US$147 in mid-July.

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