Share prices of rubber glovemakers shot up yesterday as investors foresee higher global demand for medical gloves after a two-week decline in rubber prices.
Yesterday, the benchmark rubber contract on the Tokyo Commodity Exchange for August delivery fell more than 15 per cent, or 31.1 yen, to settle at 353 yen per kg (100 yen = RM3.75).
CIMB Investment Bank analyst Ivy Ng said demand for rubber could be hit in the near term due to the physical lack of access and potential disruption to tyre and car manufacturing plants in Japan.
"Also, potential buyers could stay on the sidelines hoping to snap up these commodities at lower prices due to short-term uncertainty in the market," she added.
Just last month, China's voracious demand for cars eased as surging petrol prices, the end of government subsidies and a major holiday took a toll on the world's biggest car market.
Taking the cue from Japan's rubber price plunge, Malaysian Rubber Board yesterday reported that tyre-grade SMR 20 tumbled 49.5 sen to RM11.89 per kg while latex-in-bulk fell 45.5 sen to RM8.61 per kg.
Kenanga Research foresees natural latex prices dropping further from an all-time high of RM10.90 per kg two weeks ago.
In its update to investors titled "Better Days Ahead?", the research house had a "neutral" outlook on the rubber glove sector and placed "buy" calls on Kossan Rubber Industries Bhd and Hartalega Holdings Bhd.
It said concerns over weak US dollar and costly natural latex prices had been overly exaggerated.
Glovemakers are in for good news should natural latex prices drop further to RM8 per kg, Kenanga Research added.
When contacted, Top Glove Corp Bhd executive director Lim Cheong Guan said the recent price plunge in natural latex had spurred demand for its rubber gloves.
"Demand has started to pick up again, our clients' inventory holdings are begining to normalise."
Yesterday, all rubber glovemakers' share prices shot up except for Hartalega, which fell 10 sen to RM5.50.
In a telephone interview, Hartalega managing director Kuan Kam Hon said investors may have been unduly worried by synthetic latex supply disruption from Japan.
"I would like to go on the record that we're receiving steady supply of nitrile latex from our suppliers in Japan. Their factories are in Kawasaki, far away from the area hit by the earthquake and tsunami.
"Our suppliers have also reassured us that there's enough buffer stocks in the months ahead at their Port Klang facility," Kuan added.
Top rubber producers' meet to prop up prices
BANGKOK: The world's top rubber-producing countries, Thailand, Indonesia and Malaysia, will hold an urgent meeting this week to find ways to support prices that have collapsed this month, an senior industry official said yesterday.
The price of Thai USS3, a raw material for export grade rubber sheet (RSS3), fell to 90 baht a kg yesterday from 95 baht (100 baht = RM10.04) on Monday. That is half the record high of 180 baht hit in mid-February.
Rubber futures on the Tokyo Commodity Exchange (TOCOM), which tend to set global price trends, started falling this month when unrest in the Middle East raised concerns about the global economy and rubber demand.
Friday's earthquake in Japan added to these concerns. "We need to do something this week to stop prices from falling," Yium Tavarolit, acting chief executive of the International Rubber Consortium, said, adding that the meeting to discuss the measures will probably be held in Thailand.
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Any decision by the IRCo would have to be ratified by the International Tripartite Rubber Corporation, which groups senior government officials from IRCo countries. TOCOM's benchmark rubber contract for August delivery hit a low of 335.0 yen (100 yen = RM3.75) a kg yesterday, 12 per cent down from Monday's close of 384.1 yen.
At that point, it had lost nearly 40 per cent from a record high of 535.7 yen hit in mid-February.
The benchmark settled at 353.0 yen a kg. TOCOM rubber futures had slumped on Monday, leading to a temporary halt in trade, as rumours circulated that some buyers had defaulted on shipments of physical rubber.
Thai RSS3 traded at a four-month low of US$4.18 to US$4.20 (US$1 = RM3.04) a kg yesterday, against record-high offers at US$6.40 in mid-February.
However, there were no reports of shipment cancellations.
When the global economy faced recession in late 2008, the top three rubber producers said they would cut shipments in 2009 to prop up export prices, which had fallen to around US$1.50 a kg.
However, the measure was effectively dropped when rubber prices recovered because of strong demand from the tyre industry in China and a gradual recovery in the global economy from the second half of 2009.
Thailand may draw up separate plans to intervene in the domestic market, partly to help the government win farmers' vote in a general election likely by July.
The government would do everything within its means to push the price of USS3 higher, Deputy Prime Minister Suthep Thuagsuban said yesterday, urging farmers not to sell at current levels.
"I suggest farmers keep their rubber for a while as the government is pushing prices up very soon, so please wait to sell at 120 baht a per kg, not at this low level," he told reporters. - Reuters
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