June 17 (Bloomberg) -- Natural rubber output in Malaysia, the world’s third-largest grower, may surge 17 percent this year as rising prices prompt farmers to increase tapping, offsetting crop damage from drought, the Malaysian Rubber Board said.
“Drought has had an impact on production but overall output will increase because of price,” Salmiah Ahmad, director general of the board, said in an interview.
Production this year may climb to as much as 1 million metric tons, said Salmiah. That is more than the 900,000 tons forecast by the nation’s Plantation Industries and Commodities Ministry in May. Output last year was 856,189 tons.
Rubber futures in Tokyo have rallied about 12 percent from a five-month low on May 17 on optimism that economic expansion in Asia and record auto production in China, the biggest vehicle market, will drive demand for the commodity used in tires.
Improving demand will likely support prices at “around the current figure,” Salmiah said, without giving an estimate.
Rubber has climbed 73 percent on the Tokyo Commodity Exchange in the past year and reached a 21-month high of 338.5 yen a kilogram ($3,706 a ton) on April 16 on a seasonal drop in supply from top growers. The contract for November delivery, the most-active, dropped 2.1 percent to 279.7 yen at 11:10a.m. in Tokyo, snapping a five-day, 9.8 percent winning streak.
Prices in Malaysia have already “touched bottom and are expected to move up again,” said Salmiah. The average price for benchmark Malaysian SMR 20 grade rubber this year is expected to be about 9 ringgit ($2.75) a kilo, she said. The price has averaged 9.95 ringgit so far this year, according to data on Malaysian Rubber Board’s website.
China Factor
Malaysia’s natural rubber exports may surge 28 percent this year to 900,000 tons, said Salmiah.
“Demand for Malaysian rubber is expected to remain strong,” she said. “Although the European crisis may weaken demand, the China factor is stronger than the Europe factor.” Consumption in China, which accounts for 40 percent of Malaysia’s exports, is growing at about 10 percent a year, she said. Europe buys about 13 percent.
China’s automobile output this year may grow by as much as 15 percent, expanding from a record to 15 million units, Gu Xianghua, deputy general secretary of the China Association of Automobile Manufacturers, said May 29.
The country’s vehicle sales surged 46 percent to 13.6 million units last year, overtaking the U.S. as the world’s biggest auto market.
(bloomberg.com)
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