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Market off sharply as orders shrivel up
PHUSADEE ARUNMAS and WALAILAK KEERATIPIPATPONG
Mounting concerns about a global financial crisis and possible recession have prompted rubber buyers to freeze purchases, resulting in a sharp drop in prices by 20 baht per kilogramme over the last two weeks.
According to Luckchai Kittipol, president of the Thai Rubber Association, no purchase orders have been placed in recent days, resulting in mounting pricing pressure on daily rubber trading.
Local prices for raw rubber sheet have fallen significantly by 20 baht over the last two weeks to 68 baht per kg yesterday, while the prices of rubber smoked sheet have plummeted to 60 baht per kilogramme from 90-100 baht.
"Rubber prices are falling every day by an average of two baht per kilogramme," said Mr Luckchai. "We ourselves are wondering why the fall is so frenetic despite the fact that rubber production is not yet excessive."
World rubber production is forecast at about 10 million tonnes this year, a rise of 3.8% over the year before, while demand is seen at approximately 9.8 million tonnes, up 2%.
Thailand will produce about 3.1 million tonnes this year, up 2% from 2007.
According to Mr Luckchai, the price pressure is expected to affect Thai rubber shipments in remaining months.
For the first 10 months of this year, Thailand shipped about two million tonnes of rubber, earning the country about 200 billion baht. Full-year shipments are expected to reach 2.8 million tonnes, a rise of 1-2% from a year earlier, with value of at least 250 billion baht, about 20%.
China will remain the key market for Thai rubber, at 40% of exports, followed by Japan at 20%, the EU 20%, and the United States 10%.
Kitichai Sincharoenkul, executive director of Sri Trang Agro-Industry Plc (STA), said Thailand's rubber industry was expected to feel the pinch from the global recession next year.
"The market is very panicked and world prices keep declining every day in major bourses, resulting to freezes in business nowadays while future transactions for November delivery are very thin," he said.
He said that Thai exporters had taken a very cautious step in making forward sales due to volatile prices in major markets abroad, especially in Tokyo, and this would slow the country's rubber exports next year.
"The rubber market will no longer be as bullish like this year, which has been fuelled largely from oil prices which have skyrocketed a few months ago," said Mr Kitichai.
Surging oil prices push up the cost of synthetic rubber and reduce the appeal of natural rubber, but oil prices have fallen more than 35% from record levels in July.
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