Rubber in Tokyo Sets 30-Year High as Supply Lags Growing Demand

Nov. 5 (Bloomberg) -- Rubber in Tokyo surged to a 30-year high and futures in Shanghai advanced to a record, on concern that supply may fall short of rising demand from tire makers as rain and flooding in Asian nations disrupted production.

The April-delivery contract on the Tokyo Commodity Exchange jumped as much as 5.7 percent to 364.8 yen per kilogram ($4,515 a metric ton), the highest level since February 1980, before settling at 361.7 yen. The contract has climbed 11 percent this week, the best performance since the week ended in Dec. 19, 2008.

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. Industrywide light-vehicle sales in the U.S. gained to a 12.3 million annual rate in October, the fastest pace in more than a year, according to Autodata Corp.

“Producers have difficulty catching up to rising demand as rain and floods in Thailand and other Asian countries curbed latex output,” Takaki Shigemoto, an analyst at JSC Corp in Tokyo, said today by phone. “Rubber is likely to extend a rally as car sales will keep expanding globally.”

May-delivery rubber on the Shanghai Futures Exchange jumped by the daily price limit to a record 35,025 yuan ($5,258) a ton. The price has gained 43 percent this year.

Car Sales

Hyundai Motor Co., Honda Motor Co. and Nissan Motor Co. led U.S. sales gains for Asian carmakers as higher retail demand made October the best month since the U.S. government’s “cash for clunkers” incentive program lifted the pace to 14.2 million in August 2009, according to New Jersey-based Autodata.

Nissan, Japan’s third-largest automaker, raised its profit and global unit-sales forecasts yesterday after boosting net income by almost four times in the last quarter. The company increased its full-year vehicle sales target to 4.1 million units from an earlier target of 3.8 million.

Another Japanese carmaker, Fuji Heavy Industries Ltd., forecast this week that sales would climb to a record in China this year aided by its Legacy model. China offered 4 billion yuan of auto replacement subsidies in the first 10 months, boosting new car sales by 32.6 billion yuan, the Ministry of Commerce said in a statement posted on its website yesterday.

Rubber supply was curbed as 11 provinces in Thailand’s south, a major plantation area, have been inundated since Nov. 1, bringing the total affected area to 50 provinces, according to Thailand’s Department of Disaster Prevention and Mitigation. Floods and blackouts forced the cash-rubber center in Thailand’s Songkhla province to close since Nov. 2, according to the Rubber Research Institute of Thailand.

Heavy Rain

Rubber in Indonesia, the second-largest producer and exporter, climbed to a record yesterday after heavy rain and floods 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 yesterday. Thailand, Indonesia and Malaysia represent a combined 70 percent of global rubber output.

Production this year will probably drop 5 percent, Amir said. The association earlier forecast output this year of about 2.4 million tons.

(bloomberg.com)