SINGAPORE: A few rubber cargoes changed hands this week as lower prices kept sellers away, with traders facing uncertainty over the impact of floods in major producers and a compound recipe change in top consumer China.
Benchmark Japanese rubber futures have dropped nearly 4 percent so far in the first week of trading in 2015.
Flooding across parts of rubber producing regions in Malaysia and Thailand reduced production in December, traders said.
Rubber output in Malaysia is likely to have declined by around 30,000 tonnes in December, a senior government official said last month, as farmers stopped tapping because of the heavy rains.
No estimates were available for top producer and exporter Thailand, but traders said some key growing areas were affected.
“The key rubber producing areas in southern Thailand were flooded,” said a rubber trader from the southern city of Hat Yai.
“Production has resumed in some parts but there is still no clarity on the full impact on the supply scene.”
The supply worries helped support prices in December, though rubber ended the year down 22 percent due to concerns about demand from top consumer China.
Adding to China worries this week was the move by the country to approve a new standard for compound rubber that reduces the amount of natural rubber allowed in the formula.
The move is expected to hurt major producers in Thailand and Malaysia, analysts and traders said.
Producers are expected to ship large volumes of compound rubber into China ahead of the rule change but it is unclear whether they will make the product after July.
