China in rubber market to replenish domestic inventory

China is in the rubber market to replenish domestic inventory, but many tyre makers in the world's largest consumer are buying small quantities, waiting for physical prices in Southeast Asia to fall further, dealers said on Wednesday. Indonesia's tyre grade SIR20 changed hands overnight at levels not seen since at least mid-January, although the lower prices spurred buying from China, which imported 2.10 million tonnes of natural rubber in 2011, up 12.89 percent.
Tokyo rubber futures, which set the tone for physical prices, jumped more than 3 percent on Wednesday after hitting a three-month low, but prices have dropped nearly 5 percent since early April on renewed worries about the debt crisis in Europe and slowing demand growth in China.
"China is buying continuously, but it's a matter of price. They could pay up to $3.63 to $3.64 a kg including freight for SIR20," said a physical dealer in Singapore, who sells Indonesian and Malaysian grades. "They are looking for SMR20, but since it's wintering in Malaysia, we can't give them cheaper prices. But there's plenty of rubber in Indonesia."
China was in the market to buy tyre grades from the three main producers Thailand, Indonesia and Malaysia - following a drop in domestic stocks. Rubber inventory monitored by the Shanghai Futures Exchange fell 11.9 percent to 19,437 tonnes last week.
June/July SIR20 was traded overnight at 162.50, 162,75, 163.25 and 163.75 US cents a pound FOB. There were no details about the quantity, but dealers said the grade was sold to the United States and trading houses in Singapore, who normally ship rubber to China.
Malaysian SMR20 was traded at $3.69 a kg including freight to China, while Thai STR20 was sold at $3.70 including freight to China. There were no reports of deals for another Thai grade, RSS3. Dealers said Thailand's intervention scheme to prop up domestic prices did not show much progress, with only a few tonnes of rubber purchased by local co-operatives since the programme was launched this year. RSS3, the benchmark physical prices in Southeast Asia, hit a lifetime high at $6.40 a kg in February 2011 before slipping to the current level of around $3.80.