Tyre makers and Chinese buyers snapped up rubber after prices dropped nearly 8 percent in the past week, but weakness in futures market triggered worries about defaults, dealers said on Thursday. Thai RSS3, Indonesian SIR20 and Malaysian SMR20 grade changed hands at between $2.92 and $3.0 a kg late on Wednesday for nearby shipment, with main buyer China showing keen interest to buy on dips.
Goodyear Tire & Rubber also bought SIR20.
"China starts to ask for more goods but there are not many people who are willing to sell after a sharp drop in futures market," said a dealer in Indonesia's main growing island of Sumatra.
"There are also fears of defaults. The price has gone down so much in the past week. It's a scary market," he added.
Benchmark RSS3 was quoted at around $3 a kg on Thursday, down from $3.25 on Wednesday last week, when the price revisited a 56-year peak scaled in mid 2008.
Cash prices closely follow Tokyo rubber futures, which have slipped more than 9 percent since rising to a 16-month high of 306 yen a kg two weeks ago on selling driven by a firmer yen and worries that China's efforts to curb lending could sap demand for commodities.
China, the world's largest rubber consumer, imported 1.71 million tonnes of natural rubber in 2009, up 1.74 percent from the previous year, customs data showed. Local tyre makers are likely to step up purchases before the Lunar New Year in mid-February.
China shocked the market in late 2008 when buyers refused to pay for their cargoes after cash prices plunged from their July peak as Tokyo futures tumbled from a 28-year high, and the global economic meltdown slashed demand for cars in Europe, North America and Japan.
"If the market continues to come down, then defaults might happen, but I think some buyers will continue to come in," said a dealer in Thailand's southern city of Hat Yai.
"People have been waiting for a correction and I think we will start to see more buyers," he added.
Singapore dealers, who normally sell rubber to China, bought RSS3 at $3 a kg for February shipment but there were no reports of deals for another Thai grade, STR20.
Supplies picked up in Thailand, the world's largest producer, after heavy rains disrupted tapping. The dry wintering season is expected to start in Sumatra in the next few weeks.
SIR20 changed hands 132.50 and 133.00 U.S. cents a pound free on board (FOB) Jambi and at 132.75 FOB Palembang and Belawan in Sumatra. Goodyear bought rubber in overnight deals at 133 and 133 cents for March shipment, dealers said.
"It's a high production period in producing countries. So we have more than enough supply of raw material," said a dealer in Singapore. "That's why we have to sell."
Malaysia's SMR20 was traded around $3 a kg late on Wednesday.
(Source: irco.biz)
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