Rubber to Hover Near Current Level on Tight Supply, More Demand, IRCO Says

Natural rubber prices are likely to hover near the current level for the next two months because of tight supply and increasing demand, according to the International Rubber Consortium Ltd.

The average physical price in Thailand, Indonesia and Malaysia, the top three producers, may be about $3 per kilogram in the next one to two months, steady compared with the average so far this year, said Abdul Rasip Latiff, chief executive officer of the Bangkok-based group. Rasip spoke in an interview in Phuket after meeting with the International Tripartite Rubber Council, which represents growers and exporters in the three countries, on Aug. 6.

Rubber futures recovered from a five-month low of 250.9 yen a kilogram ($2,916 a metric ton) on May 17 due to optimism that economic expansion and low stockpiles in China and Japan would drive consumption. January-delivery rubber fell 0.3 percent to 281.3 yen on the Tokyo Commodity Exchange at 10:19 a.m.

“Rains have been more than normal in Thailand, disrupting tapping and affecting supply. Malaysia’s situation has been similar to southern Thailand,” Rasip said. Thailand’s southern provinces produce 68 percent of its output.

“Wintering season will soon start in Indonesia. Trees will shed leaves and less latex will be coming out. Production will be 20-30 percent lower than normal,” Rasip added, without giving a production forecast.

Thailand’s rubber production this year is projected to total 3.2 million tons, steady with last year, according to the Association of Natural Rubber Producing Countries. Indonesia may produce 2.6 million tons, from 2.4 million tons last year, and Malaysia’s output may amount to 1 million tons, from 857,000 tons last year, the association said. The three countries account for about 70 percent of the world’s output.

China Imports

China’s natural rubber imports are estimated to grow 5 percent this year to 1.67 million tons, the association said in a July bulletin.

Import demand from China, the largest consumer, is growing and 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.

(bloomberg.com)