Indonesia's tyre-grade rubber is still a favourite with China, but the country's buyers are starting to switch their souring to Thailand where prices have fallen sharply. Thai RSS3 prices have dropped around 7 percent in the past two weeks as supply picked up. The grade was at $2.02 a kg on Monday.
Indonesia's SIR20 was cheaper at 89 to 90 US cents per pound ($1.96 to $1.98 a kg) but buyers are showing more interest in Thai rubber. SIR20 was traded on Friday at 88.00 US cents for September shipment.
Dealers said China was looking to buy rubber for nearby shipment and replenish stocks following declines in domestic inventories. "China is still keen to buy rubber from Indonesia but I guess it has started to compare prices," said a dealer in Pekanbaru, the provincial capital of Rio in Sumatra.
"It looks like some buyers have also switched to Thailand because the price has come down. Freight rates from Thailand are also much cheaper," he said. Freight rates between Bangkok and Shanghai or Qindao were around $400 a container, lower than $650 from Begawan or Plumbing in Sumatra, said dealers.
China, the world's largest rubber consumer, bought 1,612,013 tonnes of natural rubber in 2006, up 14.5 percent from the previous year. "I heard some Thai sellers sold STR20 very cheaply at $1.97 to China on an FOB basis last week," said a dealer in Thailand's southern city of Hat Yai. "I don't know why they did it but maybe those sellers wanted to get rid of long positions. Many people are still quoting STR20 at $2 a kg," he said.
Heavy rains, which normally disrupt tapping, fell in southern Thailand at the weekend but dealers said raw material remained ample. Dealers said the price of USS3 was steady at 64 baht a kg, although offers were also heard at 63 baht.
The USS3 is the raw material for export-grade rubber sheet (RSS3). "It has rained in the last two days but nothing is serious. The weather has been good so far," said the dealer in Hat Yai. Supply has also picked up in Indonesia, the world's second-largest producer, with the dry season coming to an end in parts of the main growing island of Sumatra.
Rubber inventories in warehouses monitored by the Shanghai Futures Exchange fell 3 percent in the week ended July 5 to 77,435 tonnes from 79,740 tonnes the week before.
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