Rubber futures may climb to a 25- month high as supply in Thailand, the largest exporter, lags behind growing demand because of bad weather, according to Von Bundit Co., the country’s biggest producer.
“Global production will continue to be below demand until 2012 and that will support prices to move in a range of 250 to 350 yen per kilogram between now and 2011,” Managing Director Pongsak Kerdvongbundit said in an interview in Phuket.
Futures have recovered 12 percent from a five-month low of 250.9 yen a kilogram ($2,934 a metric ton) on May 17 on optimism that economic expansion and low stockpiles in China and Japan would drive consumption. January-delivery rubber was little changed at 282 yen on the Tokyo Commodity Exchange at 1:34 p.m.
“Demand continues to grow, but supplies are inadequate because of erratic weather,” Pongsak said. “We don’t have any rubber available and neither do our peers.”
The free-on-board price of the benchmark Thai RSS-3 grade rubber for September-delivery, which excludes freight and insurance, stood at 104.50 baht ($3.26) a kilogram on Aug. 6, the Rubber Institute of Thailand said. The price reached a record 130.55 baht on April 27.
Physical rubber prices are likely to hover near current levels at $3 a kilogram for the next two months because of tight supply and increasing demand, according to the Bangkok-based International Rubber Consortium Ltd., a producer group formed to address oversupply and low prices.
Low Stockpiles
Rubber stockpiles continue to remain below normal levels, said Abdul Rasip Latiff, chief executive officer of the group. “We’ll then see buyers building up inventories,” said Rasip. Global stocks are near 1.4 million tons, below a normal level of around 1.6 million to 1.8 million tons for about eight-10 weeks of consumption, he said.
China’s natural rubber imports are estimated to grow 5 percent this year to 1.67 million tons, the Association of Natural Rubber Producing Countries said in a July bulletin.
Demand from China, the largest consumer, is growing as car sales have expanded. China’s passenger-car sales in July rose 15.4 percent from a year earlier to 822,300 units, the China Automotive Technology & Research Center said Aug. 2. The nation’s automobile sales rose 17 percent to 1.06 million units, according to the center.
Thai Output
Natural rubber output in Thailand may decline by as much as 5 percent to 3 million tons this year as wintering lasted longer than expected and persistent rain amid the La Nina weather pattern disrupted tapping, said Pongsak.
In 2009, Thailand produced 3.2 million tons of natural rubber, according to the Association of Natural Rubber Producing Countries, which forecast Thai output will be steady this year.
Output may increase around December and January, said Pongsak. “Despite this, prices are unlikely to fall as buyers will make purchases ahead of the wintering season,” which usually start in February, he added.
Thai exports are expected to decrease as the government will raise levies for rubber exports, promoting rubber processing and boosting local consumption, Pongsak said.
The Thai government last week approved a higher levy on rubber exports, in effect from Oct. 1. The new levy ranges from 0.9 baht ($0.03) to 5 baht a kilogram based on a sliding scale of free-on-board prices, according to Supachai Phosu, deputy minister of agriculture and cooperatives. The existing levy ranges from 0.9 baht to 1.4 baht.
“Purchases of contracts expiring before October are expected to increase,” Pongsak said.
(bloomberg.com)
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