(Corrects graph 11 to say July contract fell to 217.8 yen earlier in the session, not previous session)
* SIR20 done at 85-85.50 cents/lb, SMR20 at $1.97-$2/kg
* Bridgestone buys SIR20, quantity unknown
* Tyre grade prices at lowest since at least 2009
By Lewa Pardomuan
SINGAPORE, Feb 5 (Reuters) – Tyre grade prices tumbled to multi-year lows this week because of weakness in benchmark Tokyo futures and persistent worries about slowing demand from main consumer China, dealers said on Wednesday.
Although the dip in prices spurred buying from tyre makers, the physical market was still confronted by the high inventory in China, which could cut purchases in the coming months. Markets in China are closed this week for the Lunar New Year holiday.
Indonesia’s SIR20, usually the cheapest grade in Southeast Asia, was traded late on Tuesday at 85.00 to 85.50 U.S. cents a pound ($1.87 to $1.88 a kg) for March/April delivery to a number of buyers, including top tyre maker Bridgestone Corp.
The grade was last seen traded at similar prices in 2009.
“Some majors have bought SIR20, and that is the only grade which has been mostly traded in the last one or two days,” said a dealer in Kuala Lumpur.
“I haven’t heard deals for other grades because China is still on holiday. It’s also difficult to sell rubber.”
Last week, Bridgestone bought SIR20 at 89.00, 89.50 and 91.75 cents a pound.
“Buyers placed bids for April at $1.885 this afternoon, but producers wanted to sell at $1.90 to $1.915 because the price is already so low,” said a dealer in Jakarta. “It’s no rush anyway to sell the April cargo.”
Malaysia’s SMR20 was sold to unspecified buyers at $1.97 to $2.00 overnight, down from $2.08 last week. There were no reports of deals for Thai RSS3 and STR20 rubber.
The most active July rubber contract on the Tokyo Commodity Exchange sank to a 17-month low this week due a stronger yen and concerns about China after its services sector slowed to a five-year low in January, another sign of stuttering momentum in the world’s second-largest economy.
The contract ended little changed at 220.5 yen per kg on Wednesday, having fallen to 217.8 yen earlier in the session, its weakest since September 2012.
Ample supply also weighed on TOCOM and physical prices, with rubber stored in bonded warehouses in China’s Qingdao port estimated by dealers at around 304,000 tonnes after falling to around 250,000 tonnes in October.
The increase in the inventory may suggest that speculators still use the commodity as collateral for financing.
“China will only come back next week, so practically, we don’t see many buyers,” said a dealer in Singapore. “Also, there’s plenty of stocks in the bonded warehouses. I just don’t know why there’s so much rubber there.”
Thai RSS3 was offered at $2.15 a kg, down from $2.20 traded last week. STR20 stood at $2.0 to $2.02 a kg, down from $2.10 traded last week. The offer prices for both grades varied widely among trading houses due to the thin market.
WEEK AHEAD
China could return to the physical market next week after the Lunar New Year holiday but purchases could be limited due to the high inventory. (Editing by Subhranshu Sahu)
Source: Reuters
