Rubber Climbs to 27-Month High on Tight Supply, Chinese Demand

 Oct. 15 (Bloomberg) -- Rubber in Tokyo climbed to a 27- month high for a second day as wet weather limits supplies from Asian producers while growing car sales in China and India boost demand for the commodity used in tires.

The most-active contract on the Tokyo Commodity Exchange gained as much as 1.3 percent to 343 yen per kilogram ($4,212 a metric ton), the highest level since July 2008, before trading at 341.9 yen at 10:58 a.m. The price is set for the best weekly performance since May.

Natural rubber imports by China, the world’s largest user, jumped 19 percent from a month ago to 190,000 tons in September as the nation’s passenger-car sales to dealerships quickened last month from August on additional incentives. Sales in India rose to 169,082 units in September from 129,684 a year earlier, according to the Society of Indian Automobile Manufacturers.

“Car sales are growing so rapidly in the emerging markets that demand for natural rubber from tire makers is getting stronger,” Takaki Shigemoto, an analyst at JSC Corp. in Tokyo, said today by phone. “Suppliers may not be able to catch up with growing demand as weather constrains output.”

March-delivery rubber on the Shanghai Futures Exchange added as much as 0.7 percent to a record 31,800 yuan ($4,784) a ton before trading at 31,695 yuan at 10:02 a.m. local time.

A severe drought in Yunnan at the beginning of this year and the recent torrential rain in Hainan, the top two producers in China, will reduce domestic rubber output, according to Guo Cheng, an analyst at Yongan Futures Co.

Flooding forced the evacuation of 440,000 people and destroyed 3,000 houses, with more rain expected, Xinhua News Agency reported Oct. 12, citing Governor Luo Baoming. A total of 166,700 hectares (411,925 acres) of crops have been damaged, including 74,000 hectares destroyed, the news agency said.

Rubber inventories in China climbed 5,320 tons to 36,900 tons, the Shanghai bourse said Oct. 8, based on a survey of 10 warehouses in Shanghai, Shandong, Yunnan, Hainan and Tianjin. That’s 76 percent lower than this year’s high of 151,832 tons on Jan. 21.

Cash prices in Thailand gained 1.5 percent yesterday to 118.55 baht ($3.97) per kilogram as heavy rains in the country limit supply and higher crude oil prices boost the appeal of the natural product, according to the Rubber Research Institute of Thailand. 

(bloomberg.com)