China, the world's largest rubber consumer, is likely to snap up more nearby cargoes as local stocks dry up, while persistent rains in Thailand and Indonesia have restricted supplies of raw material.
Indonesia's SIR20 was traded on Friday at between 90.00 and 90.75 US cents per pound ($1.98 and $2.0 a kg) free on board at Plumbing port in South Sumatra for September. Thailand's RSS3 was done at 2.0475 a kg for October, dealers said on Monday. December RSS3 was sold at $2.04 last week, but Malaysia's SMR20, which was also offered at $2.04, found no buyers.
"I think China is underbought. They have resisted paying at higher levels but now the price of RSS3 is moving closer to $2," said a dealer in Thailand's southern city of Hat Yai.
"So I guess the price is quite attractive for them. We expect to see frequent purchases from China," he said. The price of RSS3 has dropped more than 2 percent in the past month in sympathy with declines in Tokyo futures, which set the tone for global prices. RSS3 was offered at $2.07 a kg on Monday, while tyre-grade STR20 stood at $2.05 a kg. But dealers said demand from China, monsoon rains in Thailand and a combination of wet and dry weather in Indonesia's island of Sumatra could offer support for the physical market.
Rubber inventories in warehouses monitored by the Shanghai Futures Exchange fell 2.7 percent to 72,305 tonnes in the week ended August 23, indicating a steady use in the commodity used to make tyres, gloves and condoms.
China expects to import 1.75 million tonnes of natural rubber in 2007 from 1.61 million tonnes in 2006 to feed its growing rubber industry, according to China Rubber Industry Association.
China mainly buys rubber from the world's three main producers, Thailand, Indonesia and Malaysia. "Some sellers here may be nervous because the Thai price is getting cheaper. But I don't think sellers want to sell too cheaply because of the high price of raw material," said a dealer in Pekanbaru, the provincial capital of Rio in Sumatra.
"Supply has dropped in south Sumatra and it rains a lot in the north," he said. The dry wintering season is under way in the southern part of Sumatra, restricting the flow of latex. But heavy rains hit the northern part of the island, preventing tapers from going to work. The price of raw material has been steady in the past few weeks at between 17,600 and 17,800 rupiah a kg ($1.88 to $1.89) in North Sumatra's provincial capital of Medan.
"The price of raw material is still high in Medan. SIR20 is offered at 91.00 and 91.50 cents but I think sellers want to sell at much higher prices," said the dealer in Pekanbaru.