Sunday, February 05, 2006

Rubber-News Update

Rubber prices hit 18-year high

MALAYSIA'S natural rubber (NR) prices hit an 18-year high of RM7 a kg yesterday due to a shortage in global supply caused by continuous rain and global demand, especially from China.

On the Malaysian Rubber Exchange, SMR20 rubber grade (Standard Malaysian Rubber) settled at buyers/sellers prices of RM7.03/RM7.05 a kg respectively, more than triple the levels four years ago.

National Association of Smallholders (Nash) vice-president Aliasak Ambia said the country's more than 200,000 rubber smallholders will be the main beneficiaries.

"A hectare of rubber smallholding can produce up to 1,000kg a year and at RM7 a kg, a smallholder can earn RM7,000 a year and triple the amount if he owns 3ha provided he is hardworking," Aliasak told Business Times in a phone interview.

He had said last month that NR prices had the potential to climb even as high as RM10 a kg between three and four years.

NR prices are high due to a shortage in world supply coupled with robust demand, high synthetic rubber prices and continuous rains.

Rubber futures also rose to their highest in more than 21 years on the Tokyo Commodity Exchange last month.

In ringgit terms, the price of RM7 a kg - the benchmark price used by the industry - is a historical high for SMR20.

NR prices, however, registered their highest level ever in 1988, breaching the RM10 a kg mark, due mainly to the AIDS (Acquired Immune Deficiency Syndrome) scare then, but at the time the ringgit was equivalent to RM2.50 to the greenback.

NR prices have been spiking due to a host of reasons, including robust demand from China's hungry motor vehicle sector, higher prices of petroleum-based synthetic rubber (NR's rival) and the volatile security situation in southern Thailand.

The formation of a rubber producers pact, heavy rains which prevent tappers from venturing out to tap as well as the wintering season which saps latex output have also supported NR prices.

Thailand, Indonesia and Malaysia, which are the world's top three rubber producers respectively, account for about 80 per cent of the world's NR output.


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