* Tokyo futures down 4 pct, Shanghai prices slump 5 pct
* Buyers turn to dealers as producers refuse to sell -trader
* Indonesian grade sold at $1.53-$1.56/kg, Thai at$1.56-$1.57/kg
* Caution over China’s new rules for compound rubber imports
By Anuradha Raghu
KUALA LUMPUR, Nov 5 (Reuters) – Indonesian rubber producersheld on to stocks this week as prices tumbled to within strikingdistance of five-year lows reached in October, prompting sellersin the No. 2 producer to exercise caution, dealers said onWednesday.
Benchmark Tokyo rubber futures, which set the tonefor tyre-grade prices in Southeast Asia, fell 4 percent to atwo-week low of 191.9 yen ($1.68) per kg on Wednesday.
In Singapore, rubber futures dropped more than 4percent to 145 U.S. cents per kg and those in Shanghai tumbled 5 percent.
More evidence of weakness in China’s economy as growth inits services sector slowed to a three-month low in Octoberfuelled the sell-off in a market that has already been hit hardby excess supplies and slower demand from top consumer China.
“Most Indonesian producers don’t want to sell anythingbecause the market is so bad, so they’re just staying on thesidelines,” an Indonesia-based rubber trader said.
Top tyre maker Bridgestone Corp bought Indonesiangrade this week through dealers “because producers cannot followthe downward market trend at this moment”, the trader said.
Indonesian SIR20, a key rubber grade used by tyre makers,was sold to Bridgestone at around $1.56/kg on Monday and $1.53on Tuesday, both for delivery in January, the trader said.
Other tyre makers Sumitomo Rubber Industries andGoodyear picked up smaller lots of SIR20 for Decemberbetween $1.54 and $1.55/kg, said a Malaysian-based trader.
Thailand’s STR20 changed hands at $1.56-1.57/kg, while RSS3,another Thai grade, was sold around $1.66/kg, dealers said. Malaysia’s SMR20 traded between $1.57-$1.58/kg on free-on-boardbasis, they said.
There is caution in the market over new rules in China thatcould take effect in January and potentially hurt imports.
China’s Standards Administration published a draft law inAugust that would require compound rubber to contain no morethan 88 percent of natural rubber from Jan. 1 next year.
The draft is still open for comments but has been criticizedby industry participants who said the new mixture, which lowersthe natural rubber content from the current 95-99.5 percent,will be difficult to produce.
A Thailand-based dealer said Chinese buyers might still bekeen to import compound rubber before the new rules areimplemented, but will likely wait before booking shipments forthe forward months.
RAW MATERIAL SHORTAGE
Exports of some contracted rubber cargoes from Indonesiawere delayed last week after some farmers stopped tapping amid aslump in global prices.
Prices in Tokyo and Singapore hit 173.8 yen and 137.40 U.S.cents per kg last month respectively, their lowest since 2009.
The shortage of raw material was still prevalent in Medan,the provincial capital of North Sumatra, but prices of cup lumpshave eased to around 17,000 rupiah ($1.40) per kg from 17,500rupiah last week. A cup lump is a lump of rubber collected intapping cups on trees.
“Last month it was very difficult to get raw materialsbecause farmers didn’t want to tap,” said a Sumatran-basedtrader. “Because the prices of the raw material went up somefarmers are coming back to tap.”
But in Malaysia, farmers have yet to return to rubberplantations.
“Farmers are not motivated because it is not economical orsustainable for them to tap at the moment. Once they have leftthe trees, it’s difficult for them to come back,” theMalaysia-based trader said.(1 US dollar = 114.4400 Japanese yen)(1 US dollar = 6.1117 Chinese yuan)(1 US dollar = 12,115.0000 rupiah) (Additional reporting by Dominique Patton in BEIJING; Editingby Manolo Serapio Jr. and Himani Sarkar)
– Reuters
