Rubber Erases Losses on Speculation China, Japan May Rebuild Inventories

Rubber advanced on optimism that Japan and China may soon replenish their inventories and that supplies in Thailand, the largest exporter, remain limited.

“On fundamental aspects, declining stocks in Japan and low level of inventories in China supports optimism they will soon replenish inventories,” said Varut Rungkhum, analyst at Bangkok-based commodity broker Agro Wealth Ltd.

The December-delivery contract rose as much as 1.3 percent to 270 yen per kilogram ($3,077 a metric ton) before settling at 268.1 yen on the Tokyo Commodity Exchange. Futures fell as much as 2 percent as the slowdown in China’s car sales growth stoked concern that demand may weaken from the world’s largest user.

November-delivery rubber on the Shanghai Futures Exchange lost 0.4 percent to settle at 21,525 yuan ($3,177) a ton.

Crude rubber stockpiles held at Japanese warehouses fell 8.9 percent to 3,247 tons on June 20, according to data from the Rubber Trade Association of Japan.

China’s natural-rubber inventories increased 1,211 tons to 15,982 tons last week, based on a survey of 10 warehouses, the Shanghai Futures Exchange said on July 2. Still, stockpiles have slumped 89 percent this year.

“The tight supply situation continues for a while,” said Hiroyuki Kikukawa, general manager of research at Tokyo-based IDO Securities Co.

Rain in southern Thailand has disrupted tapping, limiting supplies, the Rubber Institute of Thailand said today.

The benchmark price in Thailand was unchanged at 112.60 baht ($3.47) a kilogram, according to the Rubber Institute of Thailand, which issues new data in the afternoon. Auctioned prices of ribbed smoked sheets fell 0.1 percent to 107.20 baht.

Tight global supplies and strong demand, especially from China, will support prices, the Association of Natural-Rubber- Producing Countries said in its June newsletter. China’s gross import of natural rubber is projected to climb 5 percent this year to 1.67 million tons, the association said.

The possibility of a “marked improvement” in supply in the short term is limited given aging trees and weather constraints, the association said June 30.

(bloomberg.com)