SINGAPORE, Dec 7 (Reuters): China, the world's largest rubber consumer, showed some buying interest this week and was likely to turn to Indonesia, which offers the cheapest grades in Southeast Asia, dealers said today.
Singapore dealers, who normally sell rubber to China, bought tyre-grade SIR20 at 73.50 US cents per pound ($1.62 a kg) free on board Palembang in South Sumatra today and at 73.75 cents free on board Belawan in North Sumatra.
Offers rose to 74.25 cents per pound in Belawan, from 73.625 cents Tuesday. Shippers offered SIR20 around 74 cents in Palembang for January/February shipments, up from 73.75 cents the previous day.
Tyre makers were expected to replenish their stocks before year-end and dealers said market sentiment was bullish because of persistent rises in the Tokyo Commodity Exchange, which sets the tone for global prices.
The benchmark May 2006 contract 0 JRU: hit a new 17-year high of 213.4 yen ($1.78) per kg, buoyed by a weaker yen and oil rising above $60 a barrel CLc1 ahead of an expected drawdown in weekly US crude stocks.
Rubber often benefits from high crude oil prices because investors believe expensive oil will encourage a shift to natural rubber from synthetic rubber, a petroleum product.
Standard Thai Rubber, or STR20 block, for January-February shipment was offered at between $1.64 and $1.65 a kg Tuesday, when Thai RSS3 rubber sheet was traded at $1.63 for February shipment.
Dealers said supply would improve later this week in Thailand, the world's largest rubber producer, as heavy rains were expected to subside and allow tapping to resume.
In Malaysia, SMR20 was steady between $1.61 and $1.64 a kg. The grade was sold to US buyers late Tuesday at $1.62.50 a kg for January through March shipments.
China's rubber futures rebounded after Tuesday's losses. On the Shanghai Futures Exchange 0 SNR: , the most active March rubber contract rose 325 yuan per tonne to 17,560 yuan.