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SINGAPORE (Dow Jones)–Natural rubber prices are unlikely to fall below $4 a kilogram in the third quarter this year, International Rubber Consortium”s acting chief executive Yium Tavarolit said Tuesday.
“Although the global economy has slowed down and investors are cautious, having sold down for the time being, rubber production and demand from tire manufacturers are steady,” he told Dow Jones Newswires.
Cash prices are well above $4.60/kg for all major tire grades. The Thai ribbed smoked sheet 3-grade is being offered above $5/kg.
Yium said despite a slowdown in top consumers China and India, their demand requirements will be “steady.”
Demand from emerging markets such as the Middle East, Brazil and Russia will also support prices, he added.
On the supply side, erratic rain in largest producer Thailand has been disrupting tapping and slowing supplies after the low-output wintering season.
Rubber output is rising in Malaysia and Indonesia, but the unsteady increase hasn”t been able to compensate for a slower rate of growth in Thai supply, Yium said in his latest weekly commentary.
The three IRCo member-countries account for about 70% of global natural rubber output.
Yium said investors can expect less volatility in natural rubber futures on the bellwether Tokyo Commodity Exchange in the third quarter, as volumes have fallen with investors staying on the sidelines in a cautious market.
The rubber market will likely be subdued the way it is this quarter, due to U.S. economic uncertainty, euro-zone debt problems and further monetary tightening in China, he said.
The benchmark Tocom RSS3 contract hit a record high of Y535.7/kg Feb. 18 this year and is now around Y380/kg–about 30% lower.
However, Yium noted, Tocom prices are now close to cash free-on-board prices and reflective of fundamentals.
Like many other trade participants, Yium attributed the surge in Tocom prices earlier this year to excessive speculation.
He said a supply shortfall in the second half is unlikely “if there are no natural disasters” affecting production.
Global natural rubber production is expected to hit 9.9 million metric tons this year, the Association of Natural Rubber Producing Countries said in its latest report. ANRPC members account for about 92% of global natural rubber output.
Source: Dow Jones