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BANGKOK, Feb 23 (Reuters) – Cash rubber prices are expected to stay above $3.0 per kg and near a 58-year high over the next few months, supported by strong demand at a time of the year when supply is normally tight, traders said on Tuesday.
Benchmark Thai rubber sheet (RSS3) was quoted at $3.25 per kg on Tuesday after hitting $3.27 per kg on Monday, the highest level since 1952.
“The rubber price should remain high for at least two months. It’s unlikely to fall below $3.0 per kg as supply will be tighter,” said a trader at Thailand’s Hat Yai rubber centre.
Traders said demand remained strong as major tyre makers, including Chinese, were buying to replenish stocks and run their operations.
“Bridgestone bought RSS3 at $3.22 per kg for prompt shipment and others are still buying. They aren’t buying in very big lots, but they keep buying,” said a trader in Singapore.
Traders said supply was likely to fall short of demand as Thailand, the world’s biggest rubber producer and exporter, was about to enter its dry season when rubber trees stop producing latex.
Trees in the south, Thailand’s major rubber-producing area, which produces around 90 percent of its annual production of 3 million tonnes, have shed their leaves and are gradually ceasing to produce latex, said a southern agricultural official.
“Output has fallen roughly 50 percent as rubber trees produce less and less latex,” he said, adding that production would stop completely by mid-March when farmers stopped tapping.
Rubber trees usually take one month to rejuvenate and produce latex again.
Traders and farmers were concerned about the effects of an El Nino pattern that could bring a prolonged dry season this year.
The Meteorological Department has warned extremely high temperatures of around 33 to 36 degrees Celsius (91-97 Fahrenheit) could hit the rubber region during March and April.
Farmers normally resume tapping at the end of the dry season, around mid-April, when rubber trees grow new leaves and start producing latex.
Meteorologists also warned of thunder storms in early May that could disrupt tapping.
“If heavy rains hit the southern region in early May, we would have a longer period of tight supply as farmers won’t be able to tap as normal,” said a farmer in Patthalung province, one of the key rubber areas in the south.
Source: Reuters