GUST 2007 AU

Natural Rubber market review rubber futures surged to a near six-week high supported by a weaker yen, lending August support to the local market. Major Chinese buyers were bargain-hunting for nearby shipments but sellers were unwilling to deal Extending from the previous month’s bullish as they themselves were short and were only trend, the market continued its uptrend in willing to commit at a higher price. After the August amid concern over tight supplies gains, the market then turned easier in the coupled with sustained consumer buying absence of buying interest coupled with interest. After the impressive gains, the uncertainty due to the volatility of the Tokyo market then turned easier in tandem with rubber futures. Buyers are sidelined on fears falls in the Tokyo rubber market. However, of overpriced rubber while sellers refused to the market regained its strength at the close sell as prices were considered too low taking of the month amid worries over tight supplies into consideration the short supply in raw due to weather conditions. Compared with materials while the Tokyo rubber settled levels on 31 July, the price of SMR 20 sharply lower as continued turmoil across the declined by 5.00 sen/kg or 0.7% to 714.00 global financial markets led to heavy cut-loss sen/kg whilst latex concentrate gained 22.50 selling by fund investors. sen/kg or 5.0% to 475.50 sen/kg. The price movements of selected grades of rubber in Towards the end of the month, prices August are shown in Table 1 . regained some of its earlier losses amid tight supplies due to persistent rains in Thailand At the beginning of the month, prices and a combination of wet and dry whether in continued to firm on strong buying support Indonesia coupled with strong Chinese amid uncertainty over supplies. The Tokyo buying interest. Chinese buyers were

Table 1: Prices of SMR CV, SMR 20 and Latex Concentrate, August 2007 (sen/kg)

SMR CV SMR 20 Latex Concentrate Highest 806.50 742.50 475.50

Lowest 769.00 692.50 456.00

Average 787.05 717.16 467.23

Change from the last -15.50 -5.00 22.50 day of the previous month

Note: * Official price of latex concentrate in bulk, 60% DRC Source: Malaysian Rubber Board

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MRB Daily Noon Prices, August 2007

880 840 800 760 SMR 20 720 680 640 600 560 520 sen/kg Latex in Bulk 480 440 400 360 320 280 240 200 2 3 4 5 6 9 10 11 12 13 16 17 18 19 20 23 24 25 26 27 30 31

SMR 20 and Latex ( in Bulk,60% DRC) Noon Prices (01/09/2006-30/08/2007) 900 860 820 SMR 20 780 740 700 660 620 580 540 sen/kg 500 Latex in Bulk 460 420 380 340 300 260 220 180 Sept 06 Oct NovDec Jan 07 Feb MarApril May June July Aug

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reported in a short position and were buying East Kalimantan to finance the project. to cover their commitments. Rubber inventories in warehouses monitored by -factiva.com, 23 Aug Shanghai Futures Exchange fell by 2.7% to 72,305 tonnes as at Aug 23. The Tokyo rubber settled higher on short-covering Vietnam companies to plant rubber in activities, with sentiment lifted on news of Cambodia wet weather in southern Thailand and northern Peninsular Malaysia and firmer Three Vietnamese natural rubber production physical prices. companies have joined forces to create a joint stock company and cultivate 1,000 hectares of rubber plantations in Cambodia. Outlook The Vietnam Rubber Industry Group, Phu Rieng Rubber Company and Da River Wet weather would continue to be the Corporation have secured a 70-year lease fundamental market factor in the short term. on 1,000 hectares of land in Cambodia's With the current unpredictable weather Kratie Province, Vietnam Rubber Association conditions in Thailand and Indonesia, prices Secretary General Tran Thi Thuy Hoa said are expected to stay firm in the near term recently. due to tight supply and supportive regional market conditions. Anticipated demand from “The new company will be called the Phu Chinese buyers who were sidelined earlier Rieng-Karatie Joint Stock Company; the would have a positive impact on the regional company is currently preparing the land for prices. new planting, and the area will be finalized later this year," Hoa said.

News Brief Emerging major producer Vietnam has embarked on a large-scale natural rubber production expansion program and aims to Indonesia’s Balikpapan to turn bush land into boost output to around 1 million metric rubber plantations tonnes by 2015, compared with around 600,000 tonnes estimated for 2007. Encouraged by the strong demand for natural rubber in international market, the Vietnam plans to expand its plantations by Balikpapan district administration of East 500,000 hectares in the coming years, Kalimantan plans to grow rubber over 1,000 mainly in the central highlands and northern hectares of bush lands every year. regions.

There are 20,000 hectares of bush land Plantation development programs are also potential to be developed into rubber underway in neighboring Laos and plantations in Balikpapan, head of the district Cambodia. office of the agriculture ministry Chaidar CH said. Years of political instability in these countries have led to an abundance of land that is now The climate is favorable and the market is ripe for outside investment, while favorable encouraging to grow rubber in several areas soil and climate are also a big draw to in that district, Chaidar said. overseas plantation companies, analysts said. He said the district administration will use a grant from the provincial administration of Industry observers have previously said 3

Vietnam has the capacity to supersede Synthetic rubbers in China are mainly used Malaysia's position as the world's third- in tyre and shoemaking sectors. largest natural rubber producer in the coming years, based on current annual output Due to the rapid demand increase for growth. synthetic rubbers, since 2003, the amount of synthetic rubbers imported by China has -factiva.com, 10 Aug been more than 1 million tonnes each year. The imported amount of synthetic rubbers reached around 1.3 million tonnes in 2006, PolymerLatex plans nitrile rubber expansions an increase of 19.3% over 2005.

PolymerLatex (Marl, Germany) says it plans China's rubber industry will continue to to build a new 100,000 m.t./year nitrile latex expand rapidly and provide an opportunity to plant at Johor Bharu, Malaysia, due the development of the synthetic rubber onstream in the third quarter of 2009. The sector. According to preliminary estimates, company also plans to increase nitrile latex the demand for synthetic rubbers in China capacity at its existing Filago, Italy plant by will increase steadily during 2007-2010 and 20,000 m.t./year, in the first quarter of 2008. reach around 3.55 million tonnes in 2010. The additional capacities will enable it to meet "growing demand" from the nitrile glove -factiva.com, 6 Aug industry worldwide. The company says this market is growing in the double-digits due to "recent developments in natural rubber, as Rubber glove manufacturers face higher raw well as the superior properties of nitrile materials cost gloves." The baht's strength has forced 140 out of -factiva.com, 22 Aug 200 small rubber-glove manufacturers to suspend operations as they shoulder higher production costs. Demand for synthetic rubbers rises steadily Sukhum Wongek, director of the Rubber According to the statistics made by the Research Institute of Thailand, said small National Bureau of Statistics of China, the manufacturers faced higher raw-material output of synthetic rubbers in China was costs, while the stronger baht resulted in 1.845 million tonnes in 2006, an increase of lower margins. 11.1% over 2005. The output of SBR (styrene-butadiene rubber) was the highest, In addition, their production efficiency needs accounting for 31.5% of the total. Sinopec financial support, particularly soft loans for Beijing Yanhua Petrochemical Company Ltd. machinery replacement as well as to is the largest synthetic rubber producer in maintain working capital. China and the output of the company was 263 thousand tonnes in 2006, accounting for Sukhum added that the price of natural 14.3% of the national total. rubber tend to decline in line with world prices. However, the International Rubber The apparent consumption of synthetic Study Group predicted that global rubber rubbers in China was around 3.06 million consumption would reach 10.5 million tonnes tonnes in 2006, an increase of 18.2% over this year, while supply will be 10.42 million 2005. In the total consumption, the tonnes. proportion of domestic products was 60.2 per cent. -factiva.com, 15 Aug

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Bridgestone expanding overseas output cals and toxins found.

Bridgestone Corporation, the Tokyo-based The NHTSA ordered the recall after Foreign tyre maker said its subsidiary Bridgestone Tyre Sales told the agency that some of India (BSID) would expand production ca- Hangzhou Zhongce's tyres were made with- pacity at its passenger car and light truck ra- out a safety feature, called a gum strip, that dial tyre plant in Indore, India, to meet bur- helps bind the belts of a tyre to each other. geoning demand spurred by a booming do- Some of the tyres had a gum strip about half mestic market. the width of the 0.6 millimetre gum strip For- eign Tyre Sales expected. Meanwhile, PT Bridgestone Tyre Indonesia would increase capacity at its similar plant in -factiva.com, 10 Aug Karawang, Indonesia in response to growing demand, in this case mainly for export mar- kets. Glovemakers to challenge US firm’s patent infringement claim The economy in India is currently expanding rapidly, and the number of automobiles Seven Malaysia glove producers and Indo- owned is increasing. nesian one have teamed up to contest US- based Tillotson Corp’s claim that there has BSID decided to increase production capac- been a patent infringement by the companies ity at its Indore and Karawang plant at cur- involving nitrile gloves exported to the US. rent capacity of 4,500 and 8,400 tyres to 15,000 and 27,000 by 2010, respectively. “We want to invalidate the patent, and will make our stand based on arguments why we -factiva.com, 22 Aug do not think the patent is valid,” Top Glove Executive Director K.M. Lee said yesterday.

Chinese tyres, toys recalled The US company is asking for a US$2 roy- alty for every 1,000 nitrile gloves imported A tyre importer said it would recall 255,000 into the US. Chinese-made tyres it claims were defective because they lack a safety feature that pre- -New Straits Times, 2 Aug vents tread separation.

The models involved are steel-belted radial - replacement tyres for pickups, vans and sport utility vehicles that consumers bought from early 2004 through mid-2006, Foreign Tyre Sales said.

The company was ordered by the National Highway Traffic Safety Administration (NHTSA) in June to recall as many as 450,000 tyres that it bought from Hangzhou Zhongce Rubber since 2002.

The recall is among a series of recent prob- lems involving imports from China. Products including toothpaste and pet food have been recalled due to dangerous levels of chemi- 5

Fox Glove wins orders from US, Belgian hospitals

Fox Glove Solutions Sdn Bhd, which develops reusable rubber gloves, has won two equal orders of half a million units from two hospitals in the US and Belgium.

The company is now in talks with a Malaysian glove maker for the commercial production of the gloves.

Chairman Datuk Tham Nyip Shen, in an interview with the Business Times, said the company has completed the prototype and is getting ready to embark on the pilot project to meet the two orders.

He expects the commercialisation of the project, which received an initial investment of US$5 million, (RM17.35 million) to kick off by the end of the year.

Tham projects demand to grow to more than 10 billion gloves in six years as the cost- saving and environmentally friendly concept of reprocessing used gloves catches on.

The reusable glove market is estimated to be a billion ringgit business in comparison to the RM72 billion natural rubber latex (NRL) glove business.

Fox Glove Solutions Sabah, a 60% controlling shareholder of Fox Glove, commissioned the first Glove Reprocessing Unit or GRU at the Malaysian Rubber Board research facility.

"These gloves can be used seven times, which means they are washable six cycles and we find that the washing costs can be lower than the manufacturing costs."

To illustrate, using a box of reusable gloves would be 40% cheaper than the standard box of gloves.

-factiva.com, 7 Aug

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Malaysia’s NR imports by countries June 2007 p Thailand 71.2%

Philippines Others 4.0% India 2.4% Indonesia Vietnam Cambodia Myanmar 0.5% 3.6% 11.2% 1.4% 5.6%

p May 2007 Thailand 74.4%

Philippines Total: 46,844 tonnes Others 5.8% 2.3% India Indonesia M yanmar 0.9% Vietnam 2.2% Cambodia 6.3% 6.8% 1.4% Total: 41,669 tonnes

Malaysia’s NR exports by countries June 2007 p China 36.3%

Germany Others 12.7% 21.0%

Turkey South Korea 1.8% 8.3% USA Canada Iran Brazil France 5.9% 2.8% Taiwan 2.2% 3.8% 2.2% 3.1%

p May 2007 China 32.2%

Others 24.4% Germany 14.1% Total: 81,069 tonnes Turkey 2.0% South Korea Canada USA 5.7% Taiwan Brazil France Iran 2.0% 6.8% 1.6% 4.0% 5.4% 1.7%

Total: 72,589 tonnes Note: P = provisional 7

Malaysia’s NR exports by types June 2007 p SMR 94.4%

Others RSS 0.4% Latex 0.4% May 2007 p SMR 4.8% 93.9%

Total: 81,069 tonnes

Others RSS 0.4% Latex 0.6% 5.0% Total: 72,589 tonnes

Malaysia’s NR consumption by sectors June 2007 p Gloves 63.8%

Other products 10.9% Tyres & Tubes Rubber Compound Rubber thread 12.7% 0.2% 12.4% Gloves May 2007 p 66.1%

Other Tyres & products Tubes Rubber Rubber 9.9% 11.9% Total: 35,057 tonnes Compound thread 0.2% 11.9% Total: 38,632 tonnes Note: P = provisional Published by the Malaysian Rubber Board, 148 Jalan Ampang, 50450 Kuala Lumpur, Malaysia. Tel: 603-9206 2000 Fax: 603-2161 6586

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