[26 Dec] Asia Rubber Ends Up On Thai Plan to Raise Export Cess

Asian rubber settled higher Friday, rising to a new 15 month high on Thailand's plans to more than treble its export cess and on spillover support from stronger dollar and crude oil, said trade participants.

The benchmark June RSS3 contract on the Tokyo Commodity Exchange settled Y1.4 higher at Y276.3/kg after reaching an intraday high of Y278.9, a level not seen since September 2008.

Amid the ongoing rise in rubber prices, Thailand's government plans to increase the rubber export cess to THB5-THB7 per kilogram from THB1.50 currently, Thailand's deputy prime minister, Suthep Thaugsuban said, after a visit to Indonesia.

The fee will be collected as a fund to support rubber farming.

The cess is to be used for planting new areas with rubber and replanting existing ones, said Pongsak Kerdvongbundit, managing director of Von Bundit Ltd, one of Thailand's biggest producers of natural rubber.

He said natural rubber production needs to be expanded to curb global warming and keep prices stable in the long-term.

However, if implemented, the increase in cess is likely to push up Thai rubber prices in the near-term to absorb the additional levy.

The benchmark March contract on the Shanghai Futures Exchange settled CNY110 higher at CNY23,450/ton after reaching a 14-month high of CNY23,605/ton even though inventories in warehouses recognised by the Shanghai Futures Exchange rose 8% during the week to Thursday to 141,693 tons.

The benchmark July contract on the Agricultural Futures Exchange of Thailand settled THB0.30 higher at THB96.45/kg after reaching an intraday high of THB97/kg.

"Institutional funds aren't very active today, but speculators continue to push up the rubber prices," said a Tokyo-based broker with Okachi Corp.

He said prices are likely to be rangebound around current levels in the near-term.

Most traders put immediate resistance on Tocom at Y280/kg, then Y286.50/kg, which is another high that was last reached in September 2008.

Traders in many rubber growing regions are not doing business today as Indonesia, Malaysia,Singapore and India are closed for a public holiday.

The rubber market has mainly been driven higher by crude oil, said a Bangkok-based trading executive.

Light, sweet crude for February delivery settled $1.38, or 1.8%, higher Thursday at a fresh three week high of $78.05 a barrel on the New York Mercantile Exchange.

A weaker yen, around Y91.48 against the dollar, was also providing support for rubber prices as it makes Japan's natural rubber imports costlier and pushes up yen-denominated Tocom futures.

Thailand is also targeting to build its internal rubber stock of 300,000 tons, Suthep said, adding that the government will contribute 100,000 tons while the private sector will provide the rest.

Indonesia and Thailand have agreed to keep their rubber export price above $2,600 per metric ton in a move to stabilize global rubber prices, Suthep added.

However, traders said prices are well above $2,800/ton.

Asian physical rubber prices were higher on strong Chinese demand, Thailand's plans to raise export tax on rubber.

"Current export tax works out to be around $42/ton and if increased to THB7/kg, it will be equivalent to around $210/ton, making it difficult for Thai factories to compete with their counterparts in Malaysia and Indonesia," said a Thailand-based trading executive. Thai STR20, RSS3 rubber were sold to buyers in China for January shipment at $2,900/ton, CIF.

(Source: irco.biz)