Rubber Rallies as Rains Tighten Supply; Shanghai Price Reaches 8-Year High

Rubber climbed to the highest level in six months as persistent rainfall in key producing countries raised concerns that supplies may tighten. Shanghai rubber advanced to the highest since at least 2002.

Futures in Tokyo gained as much as 1.9 percent to 334.4 yen per kilogram ($4,084 a metric ton), the highest level since April 19, before trading at 333.1 yen at 11:39 a.m. local time. Shanghai futures surged as much as 4.6 percent to 30,670 yuan a ton ($4,599), the highest level since at least January 2002, according to Bloomberg data.

“The rubber industry remains bullish as Chinese buyers have increased purchases after National Day holidays as its inventories are still low,” said Varut Rungkhum, an analyst at Bangkok-based commodity broker Agro Wealth Ltd.

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

The March-delivery contract on the Shanghai Futures Exchange last traded 3.1 percent higher at 30,230 yuan.

“Rainfall this year has been longer and heavier than the previous year, lowering latex levels in key producing countries,” Varut said by phone today. “Floods in Hainan will probably reduce output in China.”

Flooding in China’s southern island province of Hainan forced the evacuation of 440,000 people and destroyed 3,000 houses, with more rain expected, Xinhua News Agency reported yesterday, 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.

Indonesia Record

Cash prices in Thailand rose 2.6 percent yesterday to 116.50 baht ($3.87) per kilogram as demand from China, the largest buyer, increased to replenish its low inventories, according to the Rubber Research Institute of Thailand.

Rubber prices in Indonesia, the world’s second-largest producer, surged to a record yesterday of $3.85 a kilogram as heavy rain disrupted tapping, lowering production, according to the Rubber Association of Indonesia.

The price may advance to $4 a kilogram by the end of the month because of a “supply shortage,” while domestic demand keeps expanding, Asril Sutan Amir, the association’s chairman, said by phone today.

(bloomberg.com)