Rubber Gains as Thai Rains May Hurt Output, Record Cash Price

Dec. 16 (Bloomberg) -- Rubber climbed near a record as warnings about fresh rounds of heavy rainfall in Thailand raised supply concerns. The cash price remained at an all-time high.

May-delivery rubber on the Tokyo Commodity Exchange gained 0.8 percent to settle at 396.7 yen a kilogram ($4715 a metric ton). The contract climbed to a record 400.1 yen on Dec. 14.

More rain is expected from today to Dec. 19 in southern Thailand, which accounts for 80 percent of the nation’s output, while China and India, the top two buyers, continue purchases, according to the Rubber Research Institute of Thailand.

“The warning about rainfall prompted investors to buy the commodity on concerns that production may fall further,” said Chaiwat Muenmee, analyst at DS Futures Co., said by phone from Bangkok. “The record Thai price also provided positive sentiment to the market,” he said.

The cash price in Thailand remained at a record 141.05 baht ($4.69) a kilogram today, boosted by tight supply, the Thai institute said today on its website.

May-delivery rubber in Shanghai gained as much as 1.9 percent to 35,400 yuan ($5,312) a ton before closing at 35,050 yuan. The contract climbed to a record 38,920 yuan on Nov. 11.

Rubber futures may extend their rally, climbing 22 percent to a record, as plantations in Thailand and Indonesia enter their low-production season, said Makoto Sugitani, senior director at Newedge Japan Inc.

Wintering Demand

“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 as wintering will slash output, he said in an interview yesterday.

Wintering is the low-production season from February to April. Prices may rise to 480 yen by June, he said.

Natural rubber shipments from Indonesia, the largest grower after Thailand, may rise 6 percent to 8 percent next year on strong demand from India and China, an industry group said today.

Output of the commodity used to make tires and gloves may gain to between 2.6 million tons to 2.7 million tons as a rainy season that may last until the first quarter of next year is forecast to have a limited impact to production, the Rubber Association of Indonesia said.

(Source: http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aMJ_S1PubcYg)