SINGAPORE, April 25 — Prices of tyre grade slipped today as rubber futures tumbled on fears about weakening demand from auto makers, while main consumer China turned to cheaper cargo kept in domestic warehouses, dealers said.
Indonesia’s SIR20 grade changed hands late last week at US$4.885 (RM14.655) a kg for June shipment, down from US$5.68 a kg offered last Monday. Malaysia’s SMR20 was traded slightly above $5 as sellers struggled to find consumers.
The physical market bore the brunt of selling on Tokyo and Shanghai rubber futures as sentiment turned bearish after a devastating earthquake hit auto production in Japan, and China tightened the economy.
Toyota Motor Co is set to lose its crown as the world’s largest automaker after Japan’s earthquake and nuclear disaster slashed local output by almost two-thirds in March.
“I think we are lucky if we can still sell rubber at US$5 a kg. We offered rubber at US$4.87 but nothing happened,” said a dealer in Indonesia’s main growing island of Sumatra.
“The market is moving so fast and prices can change from morning to afternoon. Prices in China are already quite low,” he added.
The most active contract on Tokyo Commodity Exchange, currently October 2011 hit in intraday low of ¥395.4 a kg, its weakest since late March — well below a lifetime high around ¥535 struck in February.
Thai’s RSS3 grade, often regarded as a benchmark physical price, has slipped more than 8 per cent since hitting a record at US$6.40 a kg in February to track declines in futures market, although erratic weather in producing countries helped cushion the fall.
There were no deals for RSS3 and another Thai grade, STR20, as Chinese buyers switched to rubber already stored in warehouses on worries that Beijing’s monetary tightening could slash demand.
China’s turbo-charged growth eased just a touch in the first quarter, while its inflation jumped to a 32-month high, putting pressure on the government to do more to rein in prices and keep the economy on an even keel.
Dealers said SIR20 fetched a discount of up to US$100 to the prices quoted by dealers in Southeast Asia, while Thai grades were around US$20 cheaper as overstocked Chinese importers cut prices to attract tyre makers.
Week ahead
Worries about demand were likely to persist in coming weeks, but China could be tempted to buy on dips if domestic inventories kept falling.
Rubber inventories in warehouses monitored by the Shanghai Futures Exchange fell 7.7 per cent to 14,717 tonnes last Friday.
“We will be very happy if we can sell rubber at US$5 today because the market has gone down so much. Rubber in China is cheap and there’s a big discount there,” said a dealer in Singapore. “Prices in China are below US$5 a kg.” — Reuters
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