 Howard Evans |
The past two months has seen the rubber price rise to the highest levels in recent history, according to the Rubber Trade Association of Europe (RTAE).
Howard Evans, secretary general of the UK-based RTAE, attributed the price rise to "outside funds" or speculators, notably in Japan.
"All funds purchase rubber for future shipment or delivery, but with no intention of taking delivery, when they perceive prices are relatively low," he said.
Speculators then sold to maximise their investment when prices rose.
"The immediate effect of profit-taking is a sharp fall in prices. Consequently, when funds' activities predominate, as they currently do, market movements are much less moderated by routine physical sales and purchases," Evans said.
Last week rubber prices fell as funds reaped profits. Prices are now about 30 per cent higher than at the end of 2005.
Evans said rubber traders had to be "doubly cautious" that sales were not made to rubber tyre manufacturers that could run into financial difficulties.
The price change of the two main tyre grades of natural rubber:
- At December 31, 2005, TSR 20 and 3RSS (the two main tyre grades of natural rubber) were in the price range of 1,530 to 1,690 euros/metric ton CIF European ports and the RTAE market index stood at 273.21.
- On June 12, 2006, TSR 20 and 3RSS were in the price range of 2,025 to 2,393 euros/metric ton CIF European ports and the RTAE market index had risen to 375.85.
- On June 20, 2006, TSR 20 and 3RSS were in the price range of 1,925 to 2,225 euros/metric ton CIF European ports and the RTAE market index fell back to 351.21.
Evans said the London-based International Rubber Study Group anticipated rubber production and consumption in 2006 would "broadly be in balance".
"The future outlook appears to be a gradual but inexorable deficit between production and consumption unless steady new planting or re-planting is undertaken at origin."