Thai rubber prices seen advancing this year on flood-hit supply

BANGKOK (Jan 13): Thailand’s rubber prices are expected to rise this year due to scant supply, hit by unseasonal flooding in the country’s main growing region, industry players said.

Thailand, the world’s biggest rubber producer and exporter, has suffered downpours since Jan 1, resulting in flash floods that have killed 36 people and sent global rubber prices spiking on output concerns.

“In 2017, rubber prices will definitely improve, because of low supply,” Uthai Sonlucksub, president of the Natural Rubber Council of Thailand, told Reuters.

Thailand will lose around 10% of its output in the 2016-2017 crop year, an industry official said on Thursday.

Thai benchmark RSS3 rubber was quoted at US$2.61 per kg on Friday, the highest since US$2.62 on Dec 16, 2013, according to Thomson Reuters data.

Unsmoked USS3 rubber sheets also reached a 14-month high at 81.91 baht (US$2.31) per kg, a significant jump from 71.04 baht (US$2.01) on Dec 29, before the floods started.

Benchmark TOCOM rubber futures rallied to a near four-year high on Thursday, boosted by concerns over the flooding.

Thailand accounts for 37% of the world’s rubber supply, and its loss of output could dent global rubber production by 0.8% in the first quarter of 2017, said the Malaysia-based Association of Natural Rubber Producing Countries in its December report.

Global rubber prices should be advancing in 2017, after reaching a peak in 2011 and dropping ever since, said Luckchai Kittipol, honorary president of the Thai Rubber Association.

“The floods in our country helped stimulate more global demand, so prices will remain stable or go up in the first half of the year,” Luckchai said.

Thailand’s military government currently has about 310,000 tonnes of rubber in state stockpiles which it started buying from rubber farmers during price crises since 2014.

It will start auctioning 98,000 tonnes to domestic and international private firms next week.

(US$1 = 35.39 baht)