Possible rubber price increase in the mid-term

  • Business
  • Wednesday, 05 Aug 2009

PETALING JAYA: Malaysian rubber grade SMR 20 and latex-in-bulk are expected to trade higher in the mid-term as demand for natural rubber picks up due to soaring crude oil prices which makes synthetic rubber more expensive, dealers said.

A dealer said local tyre-grade SMR 20 could hit RM7 per kg if crude oil price stayed above US$70 per barrel within the next two weeks as “many international tyre makers will switch to natural rubber from synthetic rubber to control their cost.”

Synthetic rubber is a by-product of crude oil and its price moves in tandem with the commodity.

It is a direct substitute for natural rubber in many products, including car tyres.

Yesterday, local tyre-grade SMR 20 closed 3.5 sen higher at RM6.47 per kg while latex-in-bulk firmed 4.5 sen to RM4.50 per kg.

Rubber glove maker Top Glove Corp Bhd executive director Lim Cheong Guan told StarBiz that the company would adjust prices should the price of rubber continued to go up.

“As in the past, we will revise our (rubber gloves) selling price when latex price increases to offset against the impact of higher manufacturing cost.

“This is the same action taken by glove manufacturers last year when the price was above RM7 per kg,” he said.

As the largest demand for natural rubber comes from the auto industries, which have not yet fully recovered from the economic slowdown, Lim said “our view is that the price of natural rubber will move around RM4 to RM5 range (in the short term).”

The price of natural rubber had hovered around the RM4 per kg at the beginning of this year.

“The possibility of it moving upward is always there, similar to the oil price trend,” he added.

Meanwhile Bloomberg reported that rubber prices on the Tokyo Commodity Exchange (TOCOM) climbed for a fourth day after US auto sales posted their best month this year, raising optimism the vehicle industry’s worst drop in three decades may be over.

The annual pace of auto sales in the US in July increased to 11.2 million, according to data from Autodata Corp on Monday.

January-delivery rubber gained as much as 6.6 yen to 202.9 yen a kg (US$2,126 per tonne) before settling at 196.7 yen on the TOCOM.

The commodity has gained 45% this year.

“Concern is easing that a drop in car sales in the US and Japan may outpace an increase in sales in China and India,” said Kazuhiko Saito, chief analyst at Tokyo-based commodity broker Fujitomi Co.

“Rubber may climb further if China’s auto data turn out to be strong again this month,” he added.

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