Prices of Asian rubber, underpinned by thin supplies in top producing country Thailand and the start of wintering in Indonesia, are expected to stay firm in the near term, traders said on Friday. Fresh demand has emerged in Indonesia, which offered the cheapest rubber in the region, on worries that prices may climb further because of the tightness of supplies and short covering by dealers and manufacturers.
"Buyers have been flocking to get rubber, particularly Singapore dealers. Europe and the United States have also been buying sporadically," said one Indonesian trader. In the past few months, rubber supplies in the region have been under pressure after rains disrupted the tapping of trees and slowed processing at mills in Thailand, which usually ships 90 percent of its total output.
The weather in Thailand had improved slightly, allowing farmers to increase tapping, but traders said they did not expect prices to ease in the next few days.
Exporters have said they were still cautious about selling forward contracts for shipment in August and September because of the supply worries.
In Indonesia, the world's second-largest producer, wintering season when rubber trees go into low production on the western side of Sumatra island had pushed raw material prices up by four percent to 11,000 rupiah ($1.13) per kg in the past week.
Indonesian tyre-grade SIR20 August shipment offers rose 6.5 percent from a week ago to $1.33 a kilogram. September shipments were also quoted higher at $1.34 per kilogram.
Firm energy prices played a part, as higher oil prices usually prompt a shift to natural rubber from synthetic rubber a petrochemical product.
Prices of synthetic rubber have soared nearly 40 percent in the past year to around $1,700 a tonne, almost matching the surge in world crude oil prices, currently hovering near $57 a barrel.
RSS IV grade rubber was quoted at about 61 rupees ($1.4) per kg in south India compared to nearly 60 rupees a week ago, traders said.
Abraham, president of India's Pale Marketing Society, which produces most rubber in south India, said people would start exporting rubber if prices remained at the current levels.