SINGAPORE, Nov 3 (Reuters) – Asian rubber exporters are negotiating contracts with Chinese buyers after a fall in prices led to defaults on up to 80,000 tonnes of cargoes, and some sellers may want to offer discounts, industry sources said on Monday.
Chinese buyers failed to settle payments for between 60,000 and 80,000 tonnes of rubber from Asia’s producing countries and asked for cheaper prices, said Suharto Honggokusumo, executive director of the Indonesian Rubber Association.
“Some traders and end-users are negotiating to reschedule shipments. There are also price negotiations. It’s ongoing. We haven’t found a win-win solution yet. We will lose money if we cut down the prices,” he told Reuters from Jakarta, clarifying earlier remarks that only Indonesian shippers had been affected.
Rubber prices, which spiked to a 56-year peak around $3.25 a kg in July on record high oil, have been battered by heavy selling as the U.S. economy slows and car sales ease in the United States, China and Japan and Europe.
Thailand’s benchmark grade RSS3 hovered at $1.85 a kg, down 40 percent from its July peak. Dealers said exporters in Thailand, Indonesia and Malaysia, which account for 70 percent of global output, were affected by defaults from Chinese buyers.
Indonesia’s tyre-grade SIR20 for December delivery was traded late on Friday at 79 U.S. cents per pound ($1.74 a kg) free on board Palembang in South Sumatra. There were also deals at 81 cents per pound FOB Belawan in North Sumatra.
There were no reports of deals for Thai rubber and Malaysia’s SMR20 grade.
“What will happen is sellers will agree to sell rubber at a discount. It’s better than not being able to sell anything,” said a dealer in Indonesia’s main growing island of Sumatra.
“It’s scary to do business with China. They know they are the biggest buyer and they seem to think they can do anything,” he said.
China, the world’s largest rubber consumer, may also fail to settle payments with exporters from Vietnam and Cambodia, said dealers.
“I don’t think this is an easy problem to fix. The market hasn’t stopped coming down. It will be difficult to talk to the buyers,” said a dealer in Thailand’s southern city of Hat Yai.
“You can’t do anything if buyers don’t open the letter of credit. People are talking about a huge amount of defaulted cargoes, of around 100,000 tonnes,” he said.
Thailand, Indonesia and Malaysia agreed on Friday to jointly cut output by 215,000 tonnes but dealers said the move was unlikely to boost the market already hit by dwindling demand and growing fears of a global recession. [ID:nSP168606]
Tokyo rubber futures, which set the tone for the physical market, shrugged off the news to end 4 percent lower on Friday <0#JRU:>. The market was closed on Monday for a holiday.
The ASEAN Rubber Business Council (ARBC) has also urged its members to blacklist the defaulters, settle disputes amicably or by arbitration and avoid selling rubber at discounted prices, but dealers were doubtful.
“I guess it all depends on buyers and sellers. It may not be encouraged by the ARBC but it’s not an offence if they offer a discount. It’s up to them,” said a regional dealer.
The ARBC groups the world’s three main producers plus Singapore, Vietnam and Cambodia.

Source:  Reuters

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