Rubber in Tokyo Extends Rally to 30-Year High, Shanghai Climbs to Record

Rubber futures in Tokyo extended a rally to a 30-year high, while futures in Shanghai surged to a record on concern that rainfall across Southeast Asia will further squeeze tight supply and after China’s car sales soared.

April-delivery rubber on the Tokyo Commodity Exchange gained as much as 1.4 percent to 370.2 yen a kilogram ($4,525 a metric ton), the highest level since February 1980, before settling at 369.7 yen. The contract has rallied 34 percent this year. May-delivery rubber on the Shanghai Futures Exchange gained for an eighth day, climbing as much as 2.8 percent to a record 38,400 yuan ($5,782) a ton.

“Disaster across Thailand, Indonesia and Malaysia has squeezed tight supply, increasing worries over a supply shortage,” Sureerat Kunthongjun, an analyst at AGROW Enterprise Ltd., said by phone today from Bangkok. “Reports on crop losses in Thailand also fueled the rally today.”

Recent floods and storms are expected to damage 540,814 rai (213,821 acres) of rubber plantation land, government spokesman Watchara Kannikar said Nov. 9. That is equivalent to 4.5 percent of the country’s tappable area of 12 million rai, according to Bloomberg calculations. Rainfall and floods spread across two- thirds of Thailand, including the southern part, which represents about 68 percent of the total plantation area.

The cash price in Thailand, the largest producer, gained 1.6 percent to 130 baht ($4.40) per kilogram because rain in the south has cut supply, the Rubber Research Institute of Thailand said today. The price touched a record 130.55 baht on April 27. The rubber-trading center in Songkhla province was closed for three days from Nov. 2 because of floods.

Prices may surge above 150 baht by the end of this year as “demand remains robust while supply is limited,” said Supachai Phosu, deputy minister of agriculture and cooperatives.

China Car Sales

“Higher car sales in China reiterated optimism that demand for natural rubber will continue to grow,” AGROW Enterprise’s Sureerat said.

China’s passenger-car sales in October rose at the fastest pace in six months as government incentives for fuel-efficient cars boosted purchases in the world’s largest auto market.

Wholesale deliveries of cars, sport-utility vehicles and multipurpose vehicles increased 27 percent from a year earlier to 1.2 million last month, the China Association of Automobile Manufacturers said in a statement on Nov. 9.

China, the world’s bigger user of natural rubber, introduced a 3,000 yuan ($450) subsidy for energy-efficient vehicles in June to help cut smog. Consumers may also be bringing forward purchases because they’re unsure if the government and carmakers will extend buying incentives into 2011, said Xu Minfeng, an analyst at Central China Securities Holdings in Shanghai.

China’s auto demand is expected to be strong for the rest of the year, analysts from Citigroup Inc., JD Power & Co. and IHS Automotive have said.

(bloomberg.com)