By Supunnabul Suwannakij
June 18 (Bloomberg) -- Rubber consumption this year may be slower than earlier estimated as Europe’s debt crisis likely slows the global economic recovery and adverse weather curbs production, the International Rubber Study Group said.
Demand will probably increase by 4.4 percent this year to 9.8 million metric tons, based on the assumption that the economic recovery will slow, Stephen Evans, the group’s secretary-general, said in an interview. That’s lower than the group’s March forecast of 10.2 million tons.
“Demand certainly continues but the pace will depend on the European sovereign debt position,” Evans said in Kuala Lumpur. “We’re not bullish on production because of weather impacts.”
Drought caused by the El Nino weather phenomenon, which parches crops in Asia, coupled with a concern over wet weather caused by La Nina during the dry season in Indonesia, the second-biggest producer, will likely limit production growth this year, Evans said.
Global output may total 9.7 million to 10.2 million tons this year as drought and heavy rains in key producing countries curbs supply, Evans said. That compares with the group’s forecast of 10.1 million to 10.6 million tons on March 17.
Rubber futures in Tokyo have slumped about 19 percent since reaching a 21-month high on April 16 on concerns that the European debt crisis will weaken demand for the commodity used in tires. Prices had surged on optimism that economic expansion in Asia and record auto production in China, the biggest vehicle market, would drive consumption.
La Nina
November-delivery rubber was little changed at 275.2 yen a kilogram ($3,027 a metric ton) at 12:19 p.m. local time on the Tokyo Commodity Exchange today after losing as much as 1.1 percent earlier.
La Nina conditions are increasingly likely to develop this year, Australia’s Bureau of Meteorology said on June 9. La Nina, which causes wetter-than-usual weather in Asia, can benefit or damage crops depending on the severity of the preceding El Nino event.
“Unfavorable weather will have a negative influence on supply” in June and July, supporting prices, Jom Jacob, senior economist at the Association of Natural Rubber Producing Countries said in an interview yesterday. “June is supposed to be a dry month for Indonesia and India but the monsoon is going on there, disrupting tapping.”
Still, “prices may slide to 220 yen a kilogram around September to October, according to technical signals,” said Zbigwiew Tan, trading representative at commodity broker Okachi (Malaysia) Sdn Bhd. Prices will be pressured by the European debt crisis, which may eventually spill over to the U.S. and China markets, Tan said.
China Demand
“Europe remains depressed,” said Evans. “But we are less concerned about China as demand is still growing.”
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. Vehicle sales surged 46 percent to 13.6 million units last year, overtaking the U.S. as the world’s biggest auto market.
Robust consumption from China, India, Southeast Asia and Brazil will probably boost demand growth this year by 12.6 percent to 10.6 million tons, said Prachaya Jumpasut, managing director of London-based consultancy company The Rubber Economist. That would lead to a supply deficit of around 476,000 tons this year, he said.
The supply-and-demand situation will be “largely balanced,” said Evans. Consumption may rise from as much as 10.7 million tons next year to as high as 14.2 million tons in 2020. Production next year may reach 10.7 million tons, climbing to 14.2 million to 14.3 million tons in 2020, he said.
(bloomberg.com)
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