Improved economic prospects in the West provide hope for a recovery in rubber prices from four-year lows, plantations group Sipef said, adding that it was “optimistic” over palm oil values too.
The Belgian-based group – whose empire stretches from Ivory Coast to Papua New Guinea, growing crops from bananas to tea – acknowledged that the rubber market had been in a “downtrend” spurred by strong supplies at a time of concerns over demand from China, the biggest importer.
“The market place is filled with stocks, and the lacklustre macro-economic picture of China will remain a burden to the natural rubber market,” Sipef said.
Price falls
Rubber futures in Tokyo fell this week below 200 yen a kilogramme for the first time since September 2009.
In India’s key market of Kottayam, in the top producing state of Kerala, the spot price of the benchmark RSS-4 rubber grade to 14,100 rupees per kilogramme, the lowest since February 2010.
In Shanghai, benchmark September rubber futures on Wednesday set a contract low of 13,755 yuan a tonne, while Singapore’s spot May lot set a contract low of 160.20 US dollar cents a kilogramme.
Talk of plans by Thailand, the top exporting country, to plans to sell potentially 200,000 tonnes of rubber has also spooked the market.
Agriculture Minister Yukol Limlaemthong said three weeks ago that the government “will be trying to sell our rubber stocks when the price is right”, if adding that sales will not be made if prices are “too bad.”
‘Light at the end of the tunnel’
However, Thailand this week has downplayed the prospect of inventory sales, telling International Rubber Consortium officials that it will “only consider selling them if the market price of natural rubber is appropriate”.
And Sipef flagged the boost from stronger Western economies, boosting demand within the auto industry, the biggest consumer of rubber, for tyres.
“Despite the weak rubber price environment, suffering from high stocks, there seems to be some light at the end of the tunnel with better economic environments in the EU and US,” the group said.
“Correspondingly, we see better car sales globally.”
‘Optimistic on palm oil prices’
Sipef said that it had sold 41% of its expected 2014 rubber production so far, exactly in line with the pace of sales a year ago, at an average of $2,179 a tonne, down 29% year on year.
For palm oil, the group has sold 62% of forecast output, marginally ahead of last year’s pace, at an average of $993 a tonne, up $60 a tonne year on year.
SIpef said it was “optimistic about the palm oil price development throughout 2014”, despite noting the prospect of strong US production of soybeans, the source of rival soyoil, and highlighting a switch by some buyers such as India to sunflower oil too for pricing reasons.
“The market place will still remain in a tight stocks scenario until the end of the third quarter,” the group said, flagging the potential for production setbacks following a January-to-March dry spell in much of South East Asia, and the prospect of an El Nino, which may cause further drought.
“On top of that we have the biodiesel mandate in Indonesia,” which has raised the proportion of the biofuel, made from palm oil in the country, which must be mixed into forecourt diesel.
This demand “started off on a good pace, but still has not reached its full potential”.
– AgriMoney
