SINGAPORE Dec.30(Dow Jones)--After hitting a record high in February, natural rubber prices have corrected nearly 50% in the past eight months, making current prices attractive to consumers, but despite the relatively supportive fundamentals, macro-economic concerns may continue to cast a pall on prices in 2012, trade participants Friday.
"We are uncertain on the price as there are just too many factors affecting the market, although fundamentals are firm as the world needs rubber," said Pongsak Kerdvongbundit, president of the Thai Rubber Association.
Traders said they are eyeing the $3 a kilogram as the key support level for spot rubber prices. Current offer prices on the spot market are around $3.30/kg for the tire grades.
"Demand is good and all natural rubber users are having good margins at this level. The tire markers are all having a good year, so it's unlikely that prices will fall that much next year," said a major exporter in Bangkok.
Slowing growth and demand in largest consumer and importer, China, is also causing concerns. China accounts for one-third of global rubber demand.
"Chinese demand does not look promising and the Japanese market is weighed by currency factors, as well as high stock levels. Tocom rubber may fall below the Y200/kg level in 2012," said Tokyo-based Kaname Gokon, deputy general manager of Okato Shoji Co. Ltd.
The benchmark Tocom rubber contract had rose to a record high of Y535.7/kg in February before global macroeconomic concerns led to a crash in prices, with the contract finishing the year at Y263.4/kg Friday.
"Thailand's production will increase by 5% due to new tapping areas in the northeast, but we also expect consumption to increase by 5%, so fundamentals are firm," said Pongsak.
Thailand is the world's largest producer and exporter of natural rubber, accounting for one-third of global production and supply.
According to the Association of Natural Rubber Producing Countries, Thailand is expected to produce 3.3 million metric tons of rubber in 2011 and 3.5 million tons next year. Thai exports are likely to hit 2.9 million tons next year, the ANRPC said in their latest bulletin.
The International Rubber Study Group recently estimated natural rubber consumption to hit 11.5 million metric tons in 2012, leaving a shortfall of 1.1 million tons against ANRPC's global production estimate of 10 million tons.
ANRPC member nations account for 92% of global natural rubber production.
