POSSIBLE OUTLOOK: OSK Research views the demand for rubber to drop significantly as the risk of a potential auto parts shortage, especially in Japan would then have a negative impact on the global supply chain.
KUALA LUMPUR: OSK Research Sdn Bhd (OSK) believes the latex price is toppish and on the high side due to heavy rain and severe floods in southern Thailand as well as weaker Japanese auto sales.
The commodity which of late is locked between RM8.61 per kg (recent low) to about RM11 per kg (all time-high) had been on an uptrend since September last year.
“This price band is attributed to a clash between two factors, namely heavy rain and severe floods in southern Thailand, resulting in a scarcity of latex supply, being offset by weaker Japanese auto sales after the devastating earthquake created an auto parts shortage that will dampen tyre demand,” it said.
In a research note, it also said the risk of a potential auto parts shortage, especially in Japan would then have a negative impact on the global supply chain.
Japan is the world’s second largest auto parts exporter behind Germany.
“Other than this, we believe that automakers in the other parts of Asia may also face the same risk as nearly half of all Japanese auto parts shipments are destined for China and other Asian nations,” OSK explained. As such, the research house viewed the demand for rubber, to drop significantly.
Top Glove Corporation Bhd, Supermax Corporation Bhd and Kossan Rubber Industries Bhd remained as OSK’s top pick of the industry players as these companies would be the main beneficiaries when latex price eases, since they have a higher natural rubber glove mix.
Besides that, the three companies would also benefit when latex price falls as they have the largest production capacity for medical gloves.
OSK maintained an ‘overweight’ call for the rubber gloves industry. — Bernama