Tight rubber supplies and higher diesel prices are likely to support Thai rubber prices this week despite soft overseas demand, traders said on Wednesday. The price of benchmark unsmoked rubber sheet grade 3 (USS3), the raw material for export-grade rubber, has risen 4 percent over the past month, reflecting reduced supply. USS3 was trading at 47.14 baht ($1.20) per kg on Wednesday, but down from 49 baht per kg a year ago.
"We have had some rain in the past few days, but not enough to boost latex output. Supply remains tight," said one trader in the southern town of Hat Yai.
Good rain helps nourish trees and boosts latex output, but prolonged dry heat can dry trees out and reduce the amount of latex. Traders said government artificial rain-making efforts under way would not provide much relief for rubber trees which need much more water than other crops.
Domestic rubber supply has been tight since February when the wintering dry season started in the south, where about 90 percent of Thailand's rubber is produced.
Output drops up to 40 percent during the dry season, which usually lasts from March to early May in Thailand, the world's biggest producer and exporter of natural rubber. Its leading buyers are Japan, China and the United States.
On Wednesday, the price of benchmark Thai RSS3 rubber sheet for June shipment was up $0.03 per kg at $1.35 per kg, free-on-board, excluding freight costs, from a week ago. Tyre grade Standard Thai Rubber 20, or STR20 block, was steady at $1.28 per kg for June shipment.
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