Rubber in Tokyo climbed to a 27-month high, while futures in Shanghai and Thailand gained to records, after flooding in major growing nations raised concerns that a supply shortage will worsen, fueling a price rally.
The April-delivery contract on the Tokyo Commodity Exchange rose as much as 4.1 percent to 345.5 yen per kilogram ($4,274 a metric ton), the highest intraday level since July 14, 2008, before settling at 345 yen.
“Reports of floods in Thailand and Malaysia raised concerns over supply shortages, supporting prices,” Gu Jiong, an analyst at commodity broker Yutaka Shoji Co. said from Tokyo. “Supplies are unlikely to increase in the short term.”
Cyclones and monsoon rains have swamped parts of Southeast Asia in the past month, killing hundreds of people in Thailand, Vietnam and Malaysia and damaging agricultural land.
Eleven provinces in Thailand’s south, a major plantation area, have been inundated since Nov. 1, bringing total affected area to 50 provinces and leaving 122 dead, Thailand’s Department of Disaster Prevention and Mitigation said on its website today.
Floods and blackouts forced the cash-rubber center in Thailand’s Songkhla province to close since Nov. 2. Two other cash-rubber markets in Thailand’s south remained open, according to the Rubber Research Institute of Thailand.
“Farmers can’t go out tapping amid heavy rains and floods, which reduces production, while floods can also damage rubber stocks,” said Chaiwat Muenmee, analyst at DS Futures Co.
Futures in Shanghai gained for a fourth day, rising as much as 4.6 percent to a record 34,150 yuan ($5,112) a ton before closing at 34,130 yuan. The most-active contract on the Agricultural Futures Exchange of Thailand rose 2.2 percent to an all-time high of 127.70 baht ($4.30) per kilogram at 2:03 p.m. Bangkok time, according to the exchange.
Indonesia Record
Rubber in Indonesia, the second-largest producer and exporter, climbed to a record after heavy rains and floods in the country hurt supplies, according to an industry association.
“The price rose to a record after heavy rains and floods hit Thailand, Malaysia and Sumatra,” Asril Sutan Amir, chairman of the Rubber Association of Indonesia, said in a phone interview today. Thailand, Indonesia and Malaysia represent a combined 70 percent of global natural-rubber production.
The free-on-board price, or cost without freight and insurance, for Indonesia’s benchmark SIR-20 grade climbed to an all-time high of $4.06 a kilogram today, Amir said. The price was quoted at $3.99 yesterday and was about $2.87 at the start of the year, according to data compiled by International Rubber Consortium.
Fed Measures
Production this year will probably drop 5 percent, Amir said. The association earlier forecast output this year of about 2.4 million tons. “Factories can’t fulfill contracts,” he said.
“The Fed’s measures to bolster the economy also helped boost rallies in commodities and stocks,” Navarat Kaewpratarn, senior marketing official at Future Agri Trade Co., said by phone from Bangkok.
Asian stocks climbed, pushing a regional benchmark index to the highest in more than two years after the U.S. Federal Reserve said it will expand record measures to boost the world’s largest economy.
The Fed expanded asset buying by $600 billion after near- zero interest rates and $1.7 trillion in securities purchases helped pull the economy out of recession, without reviving the labor market. A revival of U.S. demand would support growth in the Asia-Pacific region, where government reports showed employers added more jobs than economists estimated in New Zealand and a seventh straight month of gains in Australian retail sales.
“The move to inject more money into the system is a massively important thing,” said James Holt, who helps manage about A$40 billion ($40.2 billion) at BlackRock Investment Management (Australia) Ltd. “Every asset class gets a kick along. The recovery looks like it’s happening, but the overwhelming evidence is that it’s a weaker-than-expected recovery.”
(bloomberg.com)
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