Chinese consumers struck deals to purchase more than 3,000 tonnes of rubber for prompt shipment at between $1.29 and $1.55 a kg as the post-Lunar New Year buying spree continued, dealers said on Friday. Thailand's RSS3 was traded at $1.55 a kg, STR20 at $1.42 a kg and Indonesia's SIR20 grade was transacted at $1.29 to $1.35 a kg. No deals for Malaysia's SMR20 grade were reported yet, said dealers.
"Their inventories have fallen and there's a possibility China is looking to buy around 10,000 tonnes today," said a dealer in Indonesia's main producing island of Sumatra, who sold February SIR20 at 58.50 US cents per pound. "I also heard there are deals for March rubber at 59 cents," said the dealer, adding that as much as 1,500 tonnes of SIR20 was traded.
China, the world's largest rubber consumer, was short of material after many buyers defaulted on shipments late last year as cash prices tumbled from a 56-year high above $3 a kg hit in July, said dealers. China returned to the physical market this week after the Lunar New Year holidays, buying rubber from Thailand, Indonesia and Malaysia to take advantage of a price drop blamed on the global economic downturn that threatens to slash world demand.
Rubber inventories in warehouses monitored by the Shanghai Futures Exchange fell almost 1 percent in the week ended Thursday, the exchange said on Friday. Rubber inventories fell to 63,655 tonnes from 64,130 tonnes two weeks before. A Singapore-based dealer said he sold around 1,400 tonnes of SIR20 and RSS3 grades, while a Bangkok dealer said he struck deals to sell 1,000 tonnes of STR20 variety. "The commitment was made last week after Chinese buyers came back from the week-long Lunar New Year," said a Bangkok dealer.
Dealers in Southeast Asia speculated the current transactions were related to a plan by China's state reserves to buy to 50,000 tonnes of rubber. But China-based dealers said it was unlikely local importers would buy rubber and then sell it to the government. "It's impossible. Traders would have to pay 20 percent import tax if they buy rubber from the international market and sell to the state reserves. It's not economical," said a Shanghai-based trader.
But talk that the government would buy rubber for the state reserves pushed up Shanghai futures this week, with the most active May contract trading as high as 13,690 yuan tonne on Friday, its strongest since early November. Firm Shanghai futures and China's purchases in the physical market also pushed up the key rubber contract on Tokyo Commodity Exchange to a one-week high of 145 yen per kg.
Industry sources said in early January that China's state reserves planned to purchase up to 50,000 tonnes of natural rubber after prices tumbled. China may be the world's top natural rubber consumer, but more than half of the rubber is sourced overseas. China imported 1.68 million tonnes of natural rubber in 2008, up 2.1 percent on the year.
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