Rubber prices are down as much as 6% this week as traders rush to sell on fears the market will become awash with surplus supply after the Thai government said it would start selling its massive stockpile.
Thai Agriculture Minister Yukol Limlaemthong said the government “will be trying to sell our rubber stocks when the price is right” although added that they won’t sell if prices are “too bad.”
“The announcement is already affecting the markets because many players just believe the news and liquidated their positions over the last few days. Some funds also created new short positions,” said Ryuta Imazeki, Tokyo-based analyst at Okachi & Co., one of the top brokers by rubber volumes traded on the Tokyo Commodity Exchange, where global benchmark rubber futures are traded. A short position is a bet that prices will fall.
London-based industry consultancy The Rubber Economist said in its first-quarter report last month that large and rising global stocks, particularly in Thailand, may continue to be the key negative factor on prices. The Thai government rubber subsidies has encouraged rubber output, it added. The firm is forecasting a 650,000-ton production surplus this year.