This year's rally in rubber, which has lifted prices by more than 20%, is not over yet, despite the boost to markets from a Thai intervention programme appearing to peter out, Standard Chartered said.

Rubber futures for July, the most traded contract, eased 0.1% to 323.40 yen a kilogramme on Thursday, after three sessions of price gains following Thailand's approval of a 15bn-baht ($480m) plan to buy up the tyre ingredient.

The scheme by Thailand, the top rubber exporter, is aimed at supporting physical prices which by the end of 2011 had roughly halved from record highs reached in February.

However, rubber futures' failure to keep on rising does not mean that a ceiling to prices has been reached, Standard Chartered said, despite acknowledging a further headwind as Indonesian trees planted during a 2006-07 plantation renewal programme mature, boosting supplies.

'Demand recovery'

While "market momentum", which has lifted Tokyo futures by 23% so far in 2012, has been supported by the Thai intervention programme, consumption looked set to take the lead in lifting prices further.

"We expect the 2012 price outlook to the driven by a demand recovery," Standard Chartered analyst Abah Ofon said.

"This hinge on China's auto sector", which should see a recovery in output from levels curbed last year by a shortage of parts, after Japanese manufacturers were disrupted by knock-on effects from the earthquake and tsunami in March.

Flooding in Thailand, another manufacturing centre for the Asian auto sector, also hampered car production, so stemming the demand for tyres, and the rubber used to make them.

"Overall, we expected [rubber] market momentum to be sustained for much for the year, and for the most active Tokyo rubber futures to average 350 yen a kilogramme in 2012."

Issue in the sums

Nonetheless, some commentators have also expressed doubts about the ambitions of the Thai rubber-buying programme, which followed protests from farmers who had already seen their rice-growing peers supported by an intervention programme.

The government has said it is seeking 200,000 tonnes, and potentially more, of rubber at 120 baht ($3.82) a kilogramme for the unsmoked sheets, so-called USS3, which growers deliver for processing.

However, the 15bn baht so far promised is sufficient to buy only 125,000 tonnes at this price.

The price of unsmoked sheets, which fell to 90 baht a kilogramme in late 2011, stood at 110 baht a kilogramme ahead of the government signing off on intervention buying.