Thai physical USS3 rubber raw material prices surged Thursday as factories continued to face tight supply due to recent rains, trading executives said.
In the central market at Chandee, prices rose above THB95 a kilogram for the first time since mid-2008 on strong demand from rubber factories.
"Many factories are facing difficulty in executing their immediate rubber export orders because raw material availability is limited," said a Hat Yai-based trading executive.
They are reluctant to take "too many" orders from tire makers because of uncertainty over USS3 supplies, he said.
Traders said this reluctance is one of the main reasons for rising prices of processed rubber such as RSS3 and STR20. Factories are jacking up offer rates for RSS3 and STR20 in line with higher raw material costs, said one of the traders.
In the last quarter of 2009, rubber factories sold large volumes of RSS3 and STR20 rubber to tire makers abroad for early-2010 shipment at then prevailing prices, expecting market to turn bearish by December-January, when supplies usually rise during the peak production season, the Hat Yai-based executive said.
At the beginning of October, USS3 rubber was being sold to factories around THB66/kg, and in mid-October the Thai government said it wanted prices to rise to THB80/kg to ensure remunerative returns to growers.
However, unseasonable rains in recent weeks have reduced market arrivals and pushed prices up even further.
On Thursday, USS3 sold at THB94.59/kg-THB95.09/kg in the three central markets.
On many days in recent weeks, market arrivals have been less than 100 metric tons when ideally at this time of year they should have been more than 200 tons.
"I've been living in Bangkok for 12 years and I haven't seen any major rains during this time of the year, as is happening now," said Chiaki Furui, chief executive of Agrow Enterprise, a Bangkok-based commodities brokerage.
Rains have now receded but supplies are still below normal while demand is strong as factories rush to meet their requirements.
On Thursday, market arrivals rose to 140 tons. There are concerns, however, that supplies may fall again by the end of next month due to the start of wintering season, when dryness and withering and falling of leaves is accompanied by reduced yields.
According to the latest data available, Thailand's natural rubber production during January-October last year fell 9.6% from a year earlier.
(Source: irco.biz)
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