Rubber Climbs to Record as Thailand Rains Hurt Output Amid Growing Demand

Rubber extended a rally to a record as heavy rains in the south of Thailand, the world’s biggest exporter, increased concerns that supply was trailing demand. The cash price gained to an all-time high.

May-delivery rubber on the Tokyo Commodity Exchange climbed to as high as 400.9 yen per kilogram ($4,784 a metric ton), before ending so-called night trading at 400.5 yen, according to intraday data on Bloomberg. Trading in this session is settled on Monday. The most-active contract advanced 4.4 percent this week, the most since the week ended Nov. 5.

The northeast monsoon is heading toward the Gulf of Thailand and southern Thailand, causing heavy rains across the region, the Thai Meteorological Department said on its website today. Persistent rains across Thailand, Indonesia and Malaysia, the top three producers, have disrupted tapping and lowered output amid demand from rising car sales in China and India.

“Worries over limited supply from key producers in Southeast Asia are fueling gains,” Chaiwat Muenmee, an analyst at commodity brokerage DS Futures Co., said by phone from Bangkok. “U.S. economic data is also spurring optimism that demand will continue to grow,” he said.

Applications for jobless insurance payments fell by 3,000 to 420,000, the lowest level in three weeks, U.S. Labor Department figures showed. Economists surveyed by Bloomberg News projected an increase in claims to 425,000, according to a median forecast.

Wintering Season

The cash price in Thailand, the world’s largest producer and exporter, extended a rally to an all-time high of 141.55 baht ($4.70) per kilogram, fueled by a supply shortage amid strong demand from local and overseas buyers, according to the Rubber Research Institute of Thailand.

“Despite high prices, demand remains strong from China, India and Japan,” Navarat Kaewpratarn, senior marketing official at Future Agri Trade Co., said by phone from Bangkok.

May-delivery rubber in Shanghai gained as much as 3.4 percent to 36,245 yuan ($5,442) a ton before closing at 36,145 yuan. The contract climbed to a record 38,920 yuan on Nov. 11.

Rubber futures may extend gains and climb to 480 yen by June as plantations in Thailand and Indonesia enter their low- production season known as wintering, said Makoto Sugitani, senior director at Newedge Japan Inc. this week.

Demand, Output

“Rubber is set to advance early next year,” said Sugitani, who correctly predicted in September that prices would rally to a record. End users will probably rush to buy rubber while it is available before output plunges during wintering, he said in an interview. Wintering runs from February to April.

Global demand for natural and synthetic rubber is forecast to increase by 15.3 percent this year to 24.3 million tons, according to the International Rubber Study Group. Consumption worldwide is expected to expand by 6.3 percent next year, it said. Natural-rubber supply is estimated at 10.2 million tons this year, the group said.

In the longer term, global rubber consumption is forecast to reach 33.9 million tons by 2020, with natural rubber production of 15.4 million tons, driven largely by strong growth in emerging markets, the group said.

(Source: http://www.bloomberg.com/news/2010-12-17/rubber-climbs-to-record-as-thailand-rains-hurt-output-amid-growing-demand.html)