Indonesian rubber prices seen falling

Indonesian rubber prices have softened in the past weeks and are expected to ease further in the next few weeks on weak demand. Prices of raw material in North and South Sumatra have eased to between 17,100 and 17,400 rupiah ($1.87-$1.90) a kg this week, from 17,800-18,000 rupiah a kg last week.
"Demand has been sluggish in the past week as buyers are waiting for prices to drop further before making fresh purchases," a trader said in Medan, the provincial capital of North Sumatra.
"But global rubber prices have also eased in the past week and that also have affected local prices," he said. Tokyo rubber futures, which set the trend for global rubber prices, have dropped in the past weeks with the benchmark January 2007 contract closing at 250.6 yen a kg on Wednesday, down from 255.7 yen a kg last week.
Slow demand from China, the world's biggest rubber consumer, has also contributed to the sluggish trade in the physical market, traders said. "There are other buyers in the market but not as big as China. China has not been buying rubber for some time, maybe they expect prices to drop further," a Jakarta trader said.
Sluggish demand will likely keep a lid on rubber prices despite ongoing wintering in southern Sumatra, traders said. Wintering occurs in the warmest month of the year when rubber trees shed their leaves and latex output slows. In southern Sumatra, wintering runs from July to September.
"No one is complaining about supply as demand is also slow with fewer buyers in the market," said the Jakarta trader, adding buyers expect prices to drop to 90 US cents a pound in the next weeks.
Deals were noted for Indonesia's tyre-grade SIR20 at 94.5 US cents per pound ($2.12 a kg) overnight, free on board Begawan for October shipment, marginally unchanged from last week. On Thursday, SIR20 was offered at between 95 and 95.5 US cents free on board Begawan, for October shipment.
Wintering in southern Sumatra is unlikely to disrupt supply as the approaching Muslim fasting month of Ramazan and Eid-ul-Fitr in September-October have prompted tapers in other rubber-growing areas to tap more rubber to get cash, said the Medan trader. Muslims make up 80 percent of Indonesia's 220 million populations.