JAKARTA: Oct 8 Top tyre maker Bridgestone Corp and some trading houses snapped up Indonesian rubber for nearby shipment at low prices as sellers ignored a call by an industry group to not sell the commodity below a prescribed floor, dealers said on Wednesday.
The Indonesian Rubber Association (Gapkindo) had urged members not to sell rubber if the price is below $1.50 a kg, in an attempt to stem a slump in prices. Global benchmark Tokyo futures are hovering near five-year lows on oversupply and concerns about economic growth in main consumer China.
But in a series of overnight deals, SIR20, one of the main grades of rubber used by tyre makers, was traded at between $1.41 and $1.435 a kg for November and December delivery, which is also well below production costs of about $1.60 a kg.
The Indonesian grade is usually the cheapest in Southeast Asia.
“You can’t tell people not to do business. There’s no sanction,” said a dealer in Jakarta. “If you have stocks, then you’ve got to sell.”
Malaysia’s SMR20 grade changed hands at $1.49 a kg, but there were no reports of deals for Thai STR20 grade, which was being offered at $1.50 to $1.55 a kg. Another Thai grade, RSS3, was offered at $1.60 a kg for November shipment.
Top rubber producers will meet in Malaysia next week to discuss measures to support prices, Thailand’s Agriculture Minister said on Monday, as farmers reel from a slide in the value of the commodity to multi-year lows.
“The price differential between SMR20 and SIR20 is narrowing. When I joined the rubber business in 2004, SMR20 was about $2,000 a tonne, and $80 to $100 a tonne more expensive than the Indonesian grade. But now, sometimes the two grades are on par,” said a dealer in Kuala Lumpur.
Thai and Malaysian rubber producers said last week that they supported an Indonesian proposal to set a minimum price, but have made no announcements on how they plan to put a floor under the market.
Previous efforts to shore up prices by Thailand, Indonesia and Malaysia have had little success even when they involved concrete measures such as supply cuts. The three countries account for more than 70 percent of global natural rubber output.
“I was wondering if the three countries have found new measures to support prices,” said a dealer in Singapore. “You can advise people not sell at below $1.50, but the decision will be made by individual producers.”