Malaysian rubber prices jumped sharply in July, driven by violence in Thailand's south and rising oil prices, and will remain high for the next six months as Hurricane Katrina takes its toll, officials and traders said.

The price of Standard Malaysian Rubber 20 rubber rose 10.4 percent to RM5.33 (US$1.41) per kilo in July from June and on a year-on-year basis was up surged 25.3 percent, the Department of Statistics said.

Exports of Malaysian natural rubber in July reached 91,817 tonnes, up 0.4 percent from June but down 1.5 percent year-on-year, with most destined for China, Iran, Germany and South Korea.

"Since 2001, we have seen rubber prices rising. This is the longest bull run in the rubber industry," said a trader with a local brokerage.

"I think rubber prices will remain on the high side for at least the next six months," said the trader, who asked not to be named.

Increase in demand

Traders said a number of factors contributed to the price rise, including security problems in Thailand's south where a Muslim insurgency is raging, as well as rising oil prices and an increase in demand from the tyre industry.

Prices have also since been boosted by Hurricane Katrina, which severely disrupted supplies in the southern United States. A large amount of rubber is shipped and stored in the ports near New Orleans.

"Certaintly Hurricane Katrina has helped push rubber prices up," the trader said.

Thailand, Indonesia and Malaysia are the world's top-three natural rubber producers.

Thailand, the biggest producer and exporter, ships around 3.0 million tonnes of rubber products a year. Another trader said security there remained a concern and this was keeping tappers away from their plantations.

"This is a significant factor driving local rubber prices up. Southern Thailand is one of the major rubber production areas in the country," the trade said.

Rubber tappers, who work in the cool of the night so that the sap does not spoil, have frequently been targeted in the violence which has left nearly 1,000 people dead since the unrest broke out in January 2004.

Dry spell

Thailand's three Muslim-majority provinces of Narathiwat, Yala and Pattani produce a combined 600,000 tonnes a year of natural rubber.

The trader said that an unexpected dry spell earlier in the year was also squeezing production in Malaysia and Thailand.

Natural rubber production in Malaysia rose 6.6 percent in July to 104,437 tonnes but was down 2.6 percent from a year earlier.

The trader also said there was strong demand for rubber from China and Japan for tyre manufacturing.

"Rubber is a major component for tyres and normally when oil prices go up, natural rubber prices also rises," he said, referring to the increased cost of manufacturing synthetic rubber.