SINGAPORE (Nov 14): Tyre-grade rubber prices were mostly unchanged this week in Asia as sellers exercised caution ahead of new import regulations in top buyer China and waited for top exporter Thailand to make good on its intervention pledge.
China's Standards Administration published a draft law in August that would require compound rubber to contain no more than 88 percent of natural rubber from Jan. 1 next year, versus the current 95-99.5 percent.
The draft has been criticized by industry participants who say it will take time and raise their costs to change over equipment to produce the new mixture.
"The market's at a standstill waiting for clarity on the China policy. How can you sell when you don't know whether this will ship or not?" asked a trader in Kuala Lumpur who said rubber being processed now is typically for shipment in January.
China's planned rule change has helped boost local prices "because it should push up the use of some domestic rubber", said Quan Shuwen, senior analyst at Dongwu Futures.
Analysts say major tyre manufacturers are unlikely to use the new compound rubber, which would be of lower quality, and could consume more locally produced natural rubber.
Shanghai rubber has risen almost 3 percent this week, versus 2 percent gains in benchmark Tokyo futures.
Thailand's STR20 grade was sold at $1.53-$1.58 per kg while RSS3 changed hands at $1.63-$1.67/kg, mostly steady from last week, said a trader based in Hat Yai in southern Thailand.
A Malaysian trader said he did not see much physical activity this week, with the Thai STR20 offered at $1.60/kg and Malaysia's SMR20 offered at $1.59/kg.
Traders were waiting for the Thai government to make good on its commitment to buy rubber from farmers as part of a 58 billion baht ($1.8 billion) subsidy plan approved last month.
Thailand's Rubber Estate Organisation has only bought once this month so far, purchasing a small quantity of rubber from farmers last week, traders said.
The Thai measures along with a minimum-price commitment by Asian producers have helped global prices recover from five-year lows, but the market remains depressed and producers will meet again next week to look at more measures, including restrictions on supply to global markets.