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25 Mar 2011


Rubber Price Trend over Remainder of 2011: Fluctuating Price due to Buying from China …Averaging THB120-130/Kg. (Business Brief No.3070)

The deep fall in rubber prices mid-March due to decelerating purchases from China has been in continuation since the Chinese New Year because they are watching the price trend closely and have reverted to the use of their own stockpiles in the meantime. Also, the MENA unrest that results in higher oil prices is fostering a concern that this turmoil may interrupt the global economic recovery and affect the automotive industry, thus affecting rubber demand.
Unexpectedly, the catastrophe in Japan has forced many key automobile factories to pause their production, which has psychologically impacted rubber prices. Nevertheless, rubber prices will likely resume to normalcy after the market panic eases.
The rubber price trend over the remainder of 2011 will need to be monitored. KResearch expects that prices will likely increase continuously into 3Q11, as a consequence of lower production released to the market as Thailand is entering dry-wintering season. In addition, inappropriate weather in Indonesia, as well as the expectation that Chinese buyers will return to the market after they deplete their inventory, should boost prices. The way that Chinese buyers return to the market will be an important factor affecting rubber prices over the reminder of this year. In 4Q11 (rubber harvest season in Thailand), prices will likely decelerate due to a higher volume of products entering the market. It is expected that the average price over the year of No. 3 ribbed smoked rubber sheets should reach around THB120-130/kg., rising 8.3-17.3 percent over 2010.

Other factor affecting rubber industry should be monitored includes the Chinese government's economic measures that may affect car sales, thus dampening rubber demand in China. When Chinese buyers will return to our market, we will need to watch their selection of sellers because the current competition in Chinese market is getting tougher, particularly with Vietnam and there are many Chinese investing in rubber plantation there. Another key factor will be relatively high Thai rubber prices, particularly for rubber compounds.