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Domestic rubber prices seen falling further

( Update: 12/08/2014 )

By Ngoc Hung - http://english.thesaigontimes.vn

HCMC - Local rubber producers and exporters have projected that domestic prices market will decline further in the coming days due to an oversupply on global markets.

Rubber prices in the southeastern provinces of Vietnam range from VND36 million to VND38 million a ton, contracting nearly VND1 million compared to early this month.

The first days of last week saw prices down to 201.7 yen per kilo, or around VND40 million a ton, and to 199.9 yen per ton at a trading session on April 28 for May delivery.

Local rubber processors and exporters attributed the price decreases to higher-than-projected output in the world’s major rubber growing countries like Thailand, Malaysia and Vietnam.

In previous years when rubber prices stayed high, other nations like Laos, Cambodia and Myanmar raced to grow rubber trees on large areas. These farms have now entered their harvest season.

The oversupply has sent inventories surging to 652,000 tons worldwide, up by 286,000 tons from last December. Notably, China alone is said to hold an inventory of some 360,000 tons, up by 40,000 tons versus end-2013.

In spite of the rising inventory, Chinese companies are increasing purchases to take advantage of low selling prices. However, Chinese companies only buy Malaysian material to produce tires rather than one from Vietnam due to lower prices.

For the reason, local firms forecast further declines in domestic prices in the near future. With Chinese and Malaysian traders buying up to 70% of Vietnam’s total output, local exporters have found themselves in hot water as their customers have already signed contracts but have not opened letters of credit to postpone imports.

Experts explained that as prices fell on a daily basis, importers did not want to carry out the signed contracts for fear that they would incur losses.