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Rubber shares shoot up as severe flooding in South hits production

The price of rubber rose as the worst flooding in 30 years in the South, where most of the rubber is grown, has had a direct impact on rubber supply in Thailand.

The price of Grade 3 ribbed smoked sheets and raw rubber sheets in Songkhla on December 4 stood at Bt70.74 and Bt67.49 per kilogramme respectively, which is double the price during the same period last year.

The Rubber Authority of Thailand expects rubber production in Nakhon Si Thammarat, Surat Thani and Songkhla to drop by 100,000 tonnes or 2 per cent of the country’s total yearly production.

Sri Trang Agro Industry (STA), which has devoted 45,000 rai to growing rubber, said the flooding has had an impact on its own productivity as well as that of its subsidiary Sri Trang Gloves Thailand (STGT) because raw materials cannot be delivered to the factories in time.

Thai Rubber Latex Group (TRUBB) has six concentrated latex factories in Thailand, three of which are located in the South, two in the East and one in the North. For now, the company is only getting fresh latex from its subsidiaries in the northern provinces of Chiang Rai, Nan, Phayao and Chai Nat.

North East Rubber (NER) is likely to suffer less of an impact because it purchases materials from farmers, middlemen and cooperatives in the Northeast.

An analyst at KTB Securities said he expects STA to be able to cope with the flooding as it has stocked raw materials for up to four months.

“However, we expect NER to benefit the most from rising rubber prices as its factories and raw material sources are in the Northeast,” he said.

He expects STA to make Bt4.6 billion in profits this year and Bt4.8 billion next year, while NER’s profits are expected to stand at Bt853 million this year and Bt1.08 billion next year.

“We advise buying both STA and NER shares,” he added.

Published : December 08, 2020

By : The Nation