Rubber supplies from Thailand and Malaysia are improving as heavy rains subside and tapping resumes, but pressure on prices could be offset as Chinese buyers return from holiday, dealers said.
Dealers noted some deals for tyre-grade SIR20 in Indonesia last week, but they said overall trading was quiet in Asia, with Tokyo rubber futures closed for a holiday to after reaching 17-year highs last week.
"People have begun tapping again.
I think the price should ease because of good weather," said one dealer in Malaysia's northern state of Penning. "China should be back in the market tomorrow but consumers in Europe and the US are not willing to buy because they think the price is too high.
I think we need a correction," he said. Malaysia's SMR20 was steady at $1.64 a kg for November and December shipment. Thai Rubber or STR20 block, for November shipment was also steady at around $1.72 per kg. SIR20 was sold on Friday at around $1.62 a kg frees on board Plumbing in Sumatra for December delivery. The same grade was offered at around $1.63 a kg on Monday in Median, a key commodities trading city in Sumatra.
Rubber prices in Southeast Asia normally track movements in Tokyo futures, which hit a 17-year high of 199 yen last week on the back of tight supply, particularly in top producer Thailand.
The benchmark March 2006 rubber contract on the Tokyo Commodity Exchange ended 0.1 yen per kg higher at 197 yen on Friday. The Japanese market sets the tone of global rubber prices. Dealers said that China, the world's largest rubber consumer, would be looking for October shipments, as supply became tighter after a typhoon destroyed a large number of rubber trees on the country's main growing area.
Most dealers in China were absent from the rubber marketing last week during a long holiday. "China is not in the market yet. It's only checking prices," said one dealer in Thailand's southern town of Hat Yai.
"STR20 is being offered at between $1.70 to $1.72 but it's difficult to get buyers at these levels. It's too high and we have to compete with SMR20," he added.
Some dealers said a correction in crude oil prices could have a slipover impact on Tokyo rubber futures, which could eventually weaken physical prices and induce fresh buying.
"I think people may want to buy October SIR20 at around $1.61 for sales to Chinese buyers. Singapore dealers keep asking me to sell at that level," said one dealer in Pekanbaru, the provincial capital of Riau on Sumatra.
Rubber often benefits from high crude prices as expensive oil may encourage users to shift to natural rubber from synthetic rubber, a petroleum product.