Rubber Climbs on Expectations of Chinese Purchases, Slowing Thai Supplies

Rubber advanced for a second time in three days on expectations of Chinese buying as stockpiles fall and supplies from Thailand, the largest grower, increase at a slower pace than estimated.

Futures in Tokyo climbed as much as 0.5 percent to 279.1 yen per kilogram ($3,087 a metric ton) after falling 1.4 percent earlier today. The most-active contract is heading for a second weekly gain amid optimism that Europe’s sovereign-debt crisis may not substantially weaken demand for the commodity used to make tires and gloves.

“Heavy rainfall in southern Thailand has sparked worries that supplies may not be as much as expected,” Varut Rungkhum, analyst at commodity broker Agro Wealth Ltd., said by phone from Bangkok. “Low stockpiles in China also boosted optimism the biggest buyers will soon start building inventories.”

Rubber for November-delivery settled at 277.9 yen per kilogram, adding 0.1 percent from yesterday, on the Tokyo Commodity Exchange.

The November-delivery contract on the Shanghai Futures Exchange gained 0.1 percent to settle at 21,520 yuan ($3,161) a ton.

“Low level of rubber stocks in Japan and Shanghai” supported the market gains, said Hiroyuki Kikukawa, general manager of research at Tokyo-based IDO Securities Co.

China’s natural rubber inventories fell 1,440 tons to 16,441 tons, based on a survey of 10 warehouses in Shanghai, Shandong, Yunnan, Hainan and Tianjin, the Shanghai Futures Exchange said June 18. It is the lowest level since 2003, according to data compiled by Bloomberg.

China Imports

China, the world’s largest auto market, is the biggest user of natural rubber. The nation may increase gross imports of the raw material to 1.68 million tons this year, from 1.59 million in 2009, according to a May report from the Association of Natural Rubber Producing Countries.

Rains are spreading in southern Thailand, with heavy rains in some province, the Meteorological Department said on its website today. Thailand’s southern provinces represent 68 percent of total rubber plantation area.

“Nearby contracts will probably stabilize as production from Thailand will increasingly come onto the market,” Katsumi Kinoshita, senior manager for Institutional Department, Orion Koeki Co. Ltd., said by phone from Kobe.

Rubber for June-delivery gained as much as 2.8 percent to settle at 364 yen per kilogram.

Global rubber output may total 9.7 million to 10.2 million tons this year as drought and heavy rainfall in key producing countries including Thailand and Indonesia damage supply, Stephen Evans, the secretary-general of the International Rubber Study Group, said in an interview last week. That compares with the group’s forecast range of 10.1 million to 10.6 million tons on March 17.

Demand will probably increase by 4.4 percent this year to 9.8 million tons, based on the assumption that the economic recovery will slow, Evans said. The group forecast 10.2 million tons in March.

(bloomberg.com)