Wednesday, April 25, 2012

GMG / Sri Trang

Rubber, GMG / Sri Trang: Possible positive sentiments, after a Bloomberg article today reported that the Thai govt is planning to introduce measures to lift the price of natural rubber to (US$4,838/MT) in 2H12, and to (US$5,806) by next year. This is on top of the measures introduced late last yr, amidst the correction in rubber prices, when the Thai authorities announced plans to purchase 200k MT of rubber to keep the price at US$3,870/MT. This compares to current RSS3 spot price of US$3,800/MT. Nattawut Saikuar, the deputy farm minister, was reported as saying that the govt intends to cut down 500k rai (80k ha) of rubber trees, from about 200k rai in 2011, to further reduce supply. DBSV note that to date the Thai govt has not purchased any rubber since the announcement of its initial plans, and the rally in rubber prices from its low of US$3,080/MT in October 2011 has been mainly a result of a change in sentiment over the global outlook. House however, in agreement that prices should rise over the course of this year due to expected improvements in economic activity and restocking in 2HCY12. Rubber processors benefit the most from a rising price environment via higher margins, hence prefer GMG Global and Sri Trang ahead of downstream names at the moment.

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