The rubber market has lost its upward momentum.
2012-04-16
The March crude oil contract on the New York Mercantile Exchange fell slightly. IMF President Lagarde stated that high oil prices pose a threat to developed countries and to all nations. Moody's report pointed out that the second round of Greek aid agreement reached last week in the Eurozone further provides financial and technical support, but constraints still exist, and the risk of Greek default remains high. Standard & Poor's announced that it has downgraded the outlook for the European Financial Stability Facility (EFSF) from stable to negative, stating that the EFSF may not be able to secure sufficient funding to support its credit rating. The drop in crude oil prices will reduce synthetic rubber costs, which is unfavorable for the natural rubber market.
Weather conditions in Thailand's natural rubber producing areas: cloudy in central and northern Thailand, cloudy in the south; in Malaysia's producing areas, rain in the southern Malay Peninsula and northern Borneo; in Indonesia's producing areas, rain north of the equator on Sumatra Island, rain south of the equator on Sumatra Island, and cloudy in southern Borneo; in China's producing areas, light rain in Hainan and cloudy in Yunnan. Currently, the weather will not have a significant impact on rubber production and transportation.
In the Asian rubber market, prices fell on the previous trading day. Market volatility has led to cautious buying, but traders expect China to return to the market in the coming weeks as consumers deplete their inventories. The Thai RSS3 rubber for March/April shipment is quoted at 400-415 cents per kilogram, down from 403-417 cents per kilogram on the previous trading day. On the 28th, the official FOB price for Malaysian standard rubber SMR20 remained stable in the morning, while Shanghai's natural rubber futures for the May contract fell by 1.30% in the early session.
On other fronts, primary dealers in the open market reported their demand for 28-day, 91-day reverse repos, and 3-month central bank bills to the central bank, but the scale is unclear. The 1-year central bank bill was not included in the demand report. Reverse repos are expected to restart today, and the central bank bills are expected to resume issuance on March 1. The easing of market liquidity conditions has provided space for the resumption of central bank bills. Currently, the inversion of the 1-year central bank bill interest rate is not significant, and after a long period of suspension, institutional demand is relatively large. The inversion of the primary and secondary market spreads for 3-month central bank bills is significant, and there is some uncertainty about whether issuance can be resumed. The scale of central bank bill issuance will affect market expectations for liquidity recovery, creating some pressure.
Overall, the commodity market is under pressure. Greece is about to face its most important test: whether it can successfully pass the bond swap. Previously, representatives of the private sector had expressed agreement to the swap agreement, but the final result will need to wait for the agreement to be signed on March 10. German Chancellor Merkel stated that if the number of participants is low, it will trigger the collective action clause, meaning Greece may face a substantial default. Additionally, S&P and Moody's have downgraded Greece's rating to selective default. China has begun to withdraw liquidity, and optimistic sentiment has faded. The external market puts pressure on rubber prices. Moreover, the loose supply of rubber restricts the rise in spot prices. Thai rubber prices have fallen back to around 400 cents per kilogram, losing upward momentum. Crude oil prices failed to break through $110, and high prices have not driven up the procurement volume of synthetic rubber, indicating that demand remains weak, and prices need to be adjusted downward to attract more buyers.
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