China is scrambling to buy rubber but there is precious little to be found in Asia. Rubber stocks in Shanghai have fallen more than 80 percent to 20,000 tonnes in the past few months, dealers said on Thursday, adding that the world's largest consumer would snap up any offers that deliver in July and August. "Everyone in China maintains a very low stock," said one dealer at a Singapore trading house.
"China still needs nearby shipments such as August, which we are fully committed. We have to keep some small quantity in hand for our regular customers. Exporters fight for a limited supply of raw material, so everyone has to be careful," he said.
China is scouring Southeast Asia for tyre-grade rubber but dealers said the three main producers, Thailand, Indonesia and Malaysia, were not keen sellers despite rising prices.
Tight supplies in Thailand, the world's largest producer and exporter, is forcing exporters to extend delays of shipments to August. Thailand's production has been choked by drought and rising violence in the south, which is keeping farmers off the land.
Exporters are also reluctant to make new offers for August onwards because of concerns about supply.
"We could not ship this month as planned. It is very difficult to find raw materials," said a Thai exporter in the southern town of Hat Yai. The price of the benchmark unsmoked rubber sheet grade 3, known as USS3, has risen 20 percent to almost 69 baht ($1.65) a kg over the past month. A year ago it sold for 45-46 baht.
Thailand ships some 200,000 tonnes of rubber products to its leading buyers in Japan, China and the United Stated every month.
"Several middle-men and farmers are holding back stocks on expectations of a further price hike. Meanwhile, exporters still need rubber to fulfill their export commitments," said one dealer.
Traders are keeping a close eye on an insurgency in southern Thailand.
Farmers say are scared to tap the trees and this week militants told people in the rubber-producing province of Narathiwat to not work on Fridays and observe the Islamic holy day of prayer.
Concerns about supply in Thailand and falling domestic stocks propelled Tokyo rubber futures to their highest level in 17 years this week before fund selling erased some of the gains.
But dealers remain upbeat on the outlook on prices for at least another month.
"Further sales could emerge, but I don't think we can expect many physical supplies in August. Yes we should see more supplies in the coming month than this month but not enough to turn around the present bullish trend," said Takashi Ogura, manager at Kanetsu Asset Management Co Ltd.
Some rubber contracts were under pressure on the belief by some traders that Japanese manufacturers would receive supplies by September and the shortage would ease. Though other players wonder where the shipments would come from to aleviate the record low stocks in Japan.
Indonesia, which sells rubber to Japan, saw rubber prices rise to 12,000 rupiah a kg from between 11,000 rupiah to 12,000 rupiah a kg last week as supplies tightened during the "wintering" season in Sumatra.
During the wintering season rubber trees shed their leaves and yields are low.
Supplies also fell in India during the rainy season.
"Prices are expected to go up and stay on the higher side because production is not much and growers are holding back stocks, expecting the prices to go up further," an official of the state-run Rubber Board said.
RSS IV grade rubber was at about 69 rupees a kg in south India compared with around 61 rupees in the beginning of July.
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