The widespread flooding in Thailand's southern provinces has pushed up rubber prices to the highest level in the industry's history.

Ribbed smoked rubber sheets No 3 (RSS3) for June delivery on 8 Nov. 2010  reached 131.5 baht per kilogram on the Agricultural Futures Exchange of Thailand, the highest level for the most active contract since the bourse was established in 2004. The price closed at 130.8 baht.

Luckchai Kittipol, president of the Thai Rubber Association, said the sharp price rise was caused by heavy flooding and the severe tropical depression that hit the South last week and damaged about 50,000 rai (one rai=1,600 sq m) of rubber plantations. The provinces most affected were Phatthalung, Songkhla, Surat Thani and Nakhon Si Thammarat.

The rubber price also increased in regional markets. May-delivery rubber on the Shanghai Futures Exchange jumped 5.8% to an all-time-high of 37,070 yuan (US$5,558) per tonne before closing at 35,865 yuan. December-delivery rubber on the Singapore Commodity Exchange advanced 2.8% to $4.34 per kilogram.

Production of rubber in the South is expected to drop, but it is difficult to estimate the decrease as there is still rubber in new plantation areas, Mr Luckchai said.

If natural rubber prices continue to rise, users may increasingly turn towards artificial rubber, currently priced at 80-90 baht per kilogram.

Rubber production in Thailand next year is projected at 3.2 million tonnes, up from 3.1 million this year. This is because there will be new rubber plantations of one million rai in the East, Northeast and Central regions.

Production in the South is expected to make up about 60% of production next year.

Rubber exports this year are forecast to be on par with last year at 2.7 million tonnes. Export value is estimated at $10 billion, nearly doubling from last year due to higher prices.

The average rubber price this year is 100-105 baht per kilogram, up from 65 baht last year.

China is the largest importer of rubber from Thailand, followed by the United States and Japan. Major demand is from tyre producers.

(Syed Rashid Ali, Karachi, Pakistan)