Rubber price at 2-year high on tight supply

PETALING JAYA: Local rubber prices rallied to a two-year high yesterday on tight supply and expectation of increasing demand from China, the world’s largest rubber importer.

Tyre-grade Standard Malaysian Rubber (SMR 20) closed at RM10.32 per kg, up RM1.15 while Latex-in-Bulk advanced RM1.25 to RM6.87 per kg.

The record price for SMR 20 was RM10.51 per kg achieved in July 2008.

A rubber trader told StarBiz that poor weather conditions affecting major rubber producing countries like Thailand and Malaysia have raised concerns over potential tightness in rubber supply over the next five months.

China is also expected to increase its rubber purchases given the continued economic growth seen this year which may lead to a pick-up in its automotive industry and demand for tyres.

“Rubber prices are fundamentally well supported for the first quarter 2010. There is a possibility that SMR 20 could register a new high at RM11 per kg within the next three weeks,” the trader said, adding that prices of rubber futures were dictating spot rubber prices.

Rubber futures had more than doubled last year in the best performance since at least 1976 on optimism that a recovery from the worst global recession since the Second World War would fuel demand for tyres and gloves.

Thailand, Malaysia and Indonesia jointly produced about seven million tonnes of rubber, representing over 70% of the total rubber world production.

Despite talks to stabilise world rubber prices, the three major producers, at end of a tripartite meeting held in Kuala Lumpur on Tuesday, decided however not to fix prices given the strengthening rubber prices in the global market.

In regional markets, Bloomberg reported rubber futures in Tokyo gained as much as 2.2%, nearing the 16-month high of 306 yen a kg (US$3,364 per tonne) that was reached in January.

Rubber for May delivery on the Shanghai Futures Exchange rose 1.6% to settle at 25,445 yuan (US$3,727) a tonne. The contract reached 26,170 yuan on Jan 11, the highest level since July 2008.

(Source: biz.thestar.com.my)