Typhoon Damrey, which swept across China and Vietnam killing at least 120 people, along with heavy rain in Southeast Asia, is expected to further squeeze rubber supply and drive up prices.
Damrey may have destroyed eight percent of the rubber trees on the tropical Chinese Island of Hanna this week and could cut production there by 20 to 40 percent this year, traders have said. Hanna accounts for about half of China's output.
"I would imagine China is very nervous because of Hanna. It looks like production will be interrupted for the next couple of months there at least," said a Singapore dealer.
China is the world's biggest consumer of rubber. The market is expected to be quiet in the coming week as China celebrates its annual weeklong National Day holiday period in the first week of October.
Traders expect, however, that China will return soon to buy more rubber. On Friday, Tokyo rubber futures edged down on profit taking, after briefly hitting a 17-year high.
The benchmark March 2006 rubber contract on the Tokyo Commodity Exchange rose as high as 192.5 yen per kg, its highest since June 1988, before slipping to 189.90 yen, or down 0.4 yen from Thursday's close of 190.3 yen.
In Thailand, the world's top rubber producer, persistent rain in the south, which produces about 90 percent of its natural rubber, has kept supply tight this month, encouraging exporters to limit their forward offers.
"We have had rain in some growing areas. The flow of raw materials supply has been disrupted," said a trader in the southern town of Hat Yai.
In Thailand, the wet season, which usually starts in October and runs through November, also kept exporters cautious. "The rainy season is arriving, it could further tighten supply," said another trader.
The price of benchmark unsmoked rubber sheet grade 3, or USS3, the raw material for export-grade rubber, has risen 34 percent in value in the last year to around 63 baht ($1.53) a kg on Friday.
The price of benchmark Thai RSS3 rubber sheet for October-November shipment was $1.68 a kg free on board, from last week's $1.72. Tyre makers were bidding at $1.65, traders said.
Tyre grade Standard Thai Rubber, or STR20 block, was at $1.68. Malaysia's SMR20 block was at $1.62 and Indonesia's SIR20 block was at $1.56.
Thailand produces around three million tonnes of rubber products a year, of which one million tonnes is STR20 block rubber. Its key buyers of rubber products are Japan, China and the United States.
In Indonesia, the world's number two exporter, the price was expected to remain supported as raw material prices have risen up to seven percent in the past week, reflecting a bullish world trend.
In North Sumatra, prices were at 14,000 rupiah ($1.37) a kg, while in South Sumatra they were at 15,000 rupiah ($1.47) per kg. "The (Muslim) fasting month is approaching and supplies will be slightly lower," said an Indonesian trader in West Sumatra province.
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