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Natural Rubber market review

October

Extending from the previous month’s bullish trend, the Kuala Lumpur rubber market surged on owing to worries over supplies coupled with active buying at the Tokyo rubber futures market. Compared with levels on 30 September, the price of SMR 20 gained 610 RM/tonne or 8.5% to close at 8,815 RM/tonne while latex concentrate gained 365 RM/tonne or 7.9% to close at 4,990 RM/tonne. The price movements of selected grades of rubber in October are shown in Table 1. Prices in the Kuala Lumpur rubber market settled higher as fundamentals continue to be strong due to tight supplies. Wet weather in rubber growing areas in Thailand and Peninsular Malaysia coupled with the earthquake situation in Indonesia gave support to the market. A 7.6-magnitude quake in West Sumatra province on September 30 raised concerns over supplies as it was expected that there may be delays in shipment of 50,000 - 60,000 tonnes of rubber due to transport problems as the Teluk Bayur port in the city was closed. However, buying activities from Chinese buyers were quiet as they were away for their long

National Holiday break beginning 1st October.

Sharp gains on the Tokyo rubber futures market saw active short covering and some fresh technical-based buying amid renewed concern over near-term supply tightness and the sharp rise in crude oil prices. Crude oil for December delivery closed at a high of US$81.19 a barrel on 23 October on concerns among investors over the weakening of the US dollar, which has hit a series of 14-month lows against the euro recently. Sentiment in the rubber market was bullish with most traders taking the cue from the Tokyo rubber futures as the increase in crude oil prices coupled with the shortage of raw materials sparked short-covering activities. The Tokyo rubber futures settled higher amid speculative short-covering following estimates by the Association of Natural Rubber Producing Countries (ANRPC) that global supply is falling at an accelerated pace due to lower output Meanwhile, the Statistics Bureau of China announced that China’s gross domestic product grew 8.9% in the third quarter as the country’s economy expanded due to stimulus spending and record lending growth. This gave further support to the movement of prices in the rubber market.

Table 1: Prices of SMR CV, SMR 20 and Latex Concentrate, October 2009 (RM/tonne)

SMR CV SMR 20 Latex Concentrate

Highest 8,345.00 7,815.00 4,990.00

Lowest 7,740.00 7,260.00 4,635.00

Average 8,044.10 7,567..50 4,838.90

Change from the last day of the previous month

640.00 610.00 365.00

Note: * Official price of latex concentrate in bulk, 60% drc Source: Malaysian Rubber Board

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MRB Daily Noon Prices, October 2009

SMR 20 and Latex ( in Bulk,60% DRC) Noon Prices (03/11/2008-30/10/2009)

4000

4400

4800

5200

5600

6000

6400

6800

7200

7600

8000

1 2 5 6 7 8 9 12 13 14 15 16 19 20 21 22 23 26 27 28 29 30

RM/tonne

Latex in Bulk

SMR 20

2,200

2,800

3,400

4,000

4,600

5,200

5,800

6,400

7,000

7,600

8,200

RM/tonne

SMR 20

Latex in Bulk

Jan MayFeb Mar Apr Jun AugNov Dec Jul Sept Oct

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Outlook

Demand from China has slowed down due to cheaper availability from local warehouses. Overall fundamentals remain strong at the moment with buyers wanting to make purchases for the nearby months but supply from Thailand, Indonesia and Malaysia is not adequate to meet their requirements coupled with declining inventories in Japanese warehouses. Prices in the near-term are expected to remain steady with support from strong crude oil prices.

News Brief

Tyre makers seeks solution The event that the US announced to impose high tariff on imported China-made tyres on September 12th has ever caused a shock among China's tyre makers. Today, the discussion seemed to calm down in public media and the tyre exporters who used to enjoy the US market are busy in seeking the markets alternative to address their difficulties. Given the high tariff, China's tyre makers have to face their overcapacity themselves, although global top ten tyre makers all contributed to this overcapacity by having built tyre factories in China. On September 26th, China Rubber Industry Association (CRIA) held a meeting in Nantong of Jiangsu province to discuss the current conditions. The conclusion formed at the meeting concludes proposed measures to help related companies solve the urgent problems. The conclusion also asks the government to increase the export rebate rate from the existing 9% to 15 percent.

.-factiva.com, 26 Oct

Indonesian exporters not obeying ITRC; rubber price recovers since mid-2009 Since rubber price in the international price starts recovering in the middle of this year, rubber exporters silently have not implemented the rubber export volume reduction program mandated by the International Tripartite Rubber Council (ITRC). The council, which involves Indonesia, Thailand, and Malaysia, has agreed to reduce rubber export volume by 700,000 tonnes under Agreed Export Tonnage Scheme (AETS). Chairperson of the Indonesian Rubber Businesses

Association (Gapkindo) Asril Sutan Amir admitted Indonesian rubber exporters silently didn’t comply with AETS anymore as rubber price had hit US$2.3 per kg. “AETS is still valid among the three countries. We only secretly don’t obey AETS,” he told Bisnis yesterday. Separately, Director of Agricultural and Forestry Commodity Export Yamanah A.C. explained the decision on the rubber export volume reduction program would be made at the next ITRC meeting Malaysia. Whether AETS will be continued or not will depand on ITRC meeting in Malaysia. According to Yamanah, Indonesia was still implementing the scheme despite the current better price. “One of the agenda at the ITRC meeting in Malysia is to monitor the implementation of AETS.”

-factiva.com, 24 Oct

IMF raises Asia growth forecasts The International Monetary Fund raised its growth forecasts for Asia's economy for this year and next, but warned that a stalled recovery in advanced economies and lingering problems in the global financial system pose risks to its rosier outlook. In its latest regional economic outlook, the IMF forecast Asia's economy will grow 2.8% this year and 5.8% next year, higher than its previous forecasts of 1.2% and 4.3%, respectively, in May. In 2008, Asia's gross domestic product grew 5.1 percent. This growth, it said, is less than the 6.7% averaged over the past decade as overseas demand for Asian products remains soft.

-factiva.com, 30 Oct

We’ll look into requests for labour flexibility

The Human Resources Ministry will look into requests by multinational companies (MNCs) for flexibility on the recruitment of foreign workers in view of the shortage of labour in some sectors. Its minister Datuk Dr Subramaniam said at least 10 companies in several sectors, including electronics, gloves, furniture, plastics and textiles, had approached the ministry to review the foreign labour recruitment policy. The ratio of local workers to foreign workers is 2:1 but they want some flexibility.

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He was commenting on reports that some MNCs were considering relocating following the Government’s policy to reduce the reliance on foreign workers. He said it was not the Government’s intention to enforce laws and practices to restrict the companies from doing business, but locals were not keen to work long hours in a factory for an average salary of between RM500 and RM600 a month.

-The Star, 2 Oct

China’s industrial output up 12.4% in Q3 China’s industrial output rose 12.4% in the third quarter from a year ago, as the economy has seen a consolidated recovery in growth with massive government spending, official data showed October 22. The figure was up 8.7% year on year in the first nine months, 6.5% points lower than that of a year ago, according to the data released by the National Bureau of Statistics (NBS) at a press conference. Zhao Jinping, a researcher with the Development Research Center of the State Council, or Cabinet, said the government had basically achieved its goal of stimulating domestic consumption, but fell short of its intention of industrial restructuring. China’s economy expanded by 8.9% in the third quarter, adding fresh hope of achieving its full-year target of 8 percent.

-factiva.com, 26 Oct

Agriculture Ministry to expand rubber plantation in North, Northeast The agriculture and Cooperatives Ministry is planning to expand rubber plantation in the northern and northeastern regions by one million rai(160,000 ha) of land following local farmers’ demands. Deputy Agriculture and Cooperatives Minister Supachai Posu said local farmers in two regions have been asking him to increase the rubber plantation, so that the farmers can earn more. He stated that 300,000 rai (48,000 ha) of lands will be planned for the North; while another 700,000 rais(112,000 ha) will be set for the northeastern region.

-factiva.com, 9 Oct

Region-specific rubber clones to be released Chairman of Indian Rubber Board, Sajen Peter said here on Friday that there is scope in Karnataka to

increase the area under rubber cultivation from the present 35,000 hectares to two lakh(200,000) hectares. Mr.Peter said that the board would release region-specific saplings of rubber clones for cultivation in different areas. “As many as 160 such clones are in the pipeline,” he said and added that two new clones of rubber would be released every five years through the Rubber Research Institute of India.

-factiva.com, 24 Oct

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Malaysia’s NR exports by countries August 2009p

Total: 59,860 tonnes

Total: 68,481 tonnes

July 2009p

Total: 68,821 tonnes

July 2009p

Total: 61,634 tonnes

Note: P = provisional

Malaysia’s NR imports by countries August 2009p

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Malaysia’s NR exports by types August 2009p

Total: 41,024 tonnes

Total: 68,481 tonnes

Malaysia’s NR consumption by sectors August 2009p

July 2009p

Total: 61,634 tonnes

July 2009p

Total: 41,597 tonnes

Note: P = provisional

Published by the Malaysian Rubber Board, 148 Jalan Ampang, 50450 Kuala Lumpur, Malaysia. Tel: 603-9206 2000 Fax: 603-2161 6586