SINGAPORE (Reuters): Tyre makers snapped up rubber for nearby shipment before prices rise again on expectations of more stimulus measures from the U.S. Federal Reserve, dealers said, although there are some concerns about rising inventories in main consumer China.
Tyre grades from Thailand, Indonesia and Malaysia for October/November delivery were sold overnight at between $2.63 and $2.93 a kg on a free on board basis to buyers from Singapore, Europe, the United States and China, the dealers said on Wednesday.
Prices were higher than a week ago as benchmark Tokyo prices have risen on hopes of monetary easing.
“Buyers are everywhere, but I would say the demand is low in China because tyre makers there are running at low production capacity,” said a dealer in Kuala Lumpur.
“Usually (Chinese tyre firms) buy ahead, but at the moment they are buying just in time as they are not certain about tyre sales.”
Vehicle sales in China rose 8.3 percent in August from a year earlier, maintaining a steady pace, but far from the blistering speed of recent years because of a recent fuel price rise and a slowing economy.
Rubber inventories in Shanghai warehouses doubled from a month ago to reach their highest in over a year, as poor physical demand led producers in China to trade more on the futures market and take advantage of higher prices.
Indonesia’s SIR20 changed hands at between 119.25 and 122.00 U.S. cents a pound, higher than 117.00 cents last week as global benchmark Tokyo futures rebounded from their weakest level in three years. Some of the cargoes were sold to dealers in Singapore, who normally ship rubber to China.
The most active rubber contract on the Tokyo Commodity Exchange, currently February 2013, climbed as high as 243.3 yen per kg, its strongest since late July, on hopes the Fed may deliver further stimulus measures this week. It settled 5.6 yen higher at 242.5 yen.
“Many trading firms are short. It’s also wintering now in Indonesia, while in Malaysia raw material supply is very low,” said a dealer in Singapore, adding that the futures market was already oversold.
Among other grades, Thai RSS3 was sold at $2.93 a kg, higher than $2.78-$2.80 last week, FOB. Another Thai grade, STR20, was traded at $2.75 a kg FOB, versus $2.65 CIF China last week.
Malaysian SMR20 rubber changed hands at $2.75 and $2.80 a kg, versus $2.65-$2.68 a kg FOB last week.
Some participants said demand was likely to pick up in China.
“China is coming back. There are reports their inventory is 250,000 or at 300,000 tons, but tyre makers in China practically have nothing in terms of stocks,” said the dealer in Singapore.
“I think 300,000 tons is only enough for consumption for less than a month. Over the last few days, Chinese tyre makers have been coming to us and they want prompt shipment because the market has moved up fast,” said the dealer, referring to rising TOCOM.