Rubber Gains to Record as China Car Sales Boost Demand Optimism

Jan. 11 (Bloomberg) -- Rubber extended its rally to a record after data showed China’s car sales jumped by a third last year, boosting expectations that demand for the commodity used in tires will keep expanding amid tight supply. The cash price in Thailand climbed to an all-time high.

June-delivery rubber climbed as high as 444.9 yen a kilogram ($5,355 a metric ton) in an after-hours trading on the Tokyo Commodity Exchange. Trade in this session will be settled tomorrow. The most-active contract has increased 7.3 percent this month, extending last year’s 50 percent rally.

China’s passenger-vehicle sales surged 33 percent in 2010, as government stimulus measures and economic growth helped the nation remain the world’s largest auto market for a second year. Annual vehicle sales surged about 10-fold in the past decade on rising affluence and government stimulus programs.

“The market is buoyed by positive news of strong car sales in China, which improved optimism that demand for car tires will continue to grow amid limited supply,” Sureerat Kunthongjun, an analyst at AGROW Enterprise Ltd., said by phone from Bangkok.

Deliveries of passenger cars, including multipurpose and sport-utility vehicles, rose to 13.8 million last year from 10.3 million in 2009, according to data yesterday from the China Association of Automobile Manufacturers. Total vehicle sales, which count trucks and buses, rose 32 percent to 18.06 million.

Total auto sales in China may reach 20 million this year, Booz & Co. and Nomura Holdings Inc. have forecast. In contrast, light-vehicle sales in the U.S. may be as much as 12.8 million units, according to Ashvin Chotai, the London-based managing director of Intelligence Asia Automotive.

“The strong figures from China added to bullish sentiment in the market,” Kazuhiko Saito, an analyst at Tokyo-based broker Fujitomi Co., said today by phone. “Chinese demand will likely expand further as analysts forecast 10 to 15 percent growth in Chinese auto sales this year.”

Tight Supply

Rising demand from China may worsen a supply shortage as rubber output in Thailand, the world’s largest producer and exporter, is set for a seasonal decline, Saito said.

Natural-rubber production in Thailand during the leaf- shedding season, from the end of February until May, shrinks 45 to 60 percent from peak production, the Association of Natural Rubber Producing Countries said in December.

Northern Indonesia will also experience a low-production period during March to May. Supply in Malaysia usually falls to 60 to 70 percent of that in the peak season, the group said.

“Low production from major producers will continue to support prices,” said Chaiwat Muenmee, analyst at Bangkok-based commodity broker DS Futures Co.

Cash Record

The Thai cash price gained to 162.80 baht ($5.30) per kilogram today, fueled by strong demand ahead of the Lunar New Year holidays and the low-production period, according to the Rubber Research Institute of Thailand. The week-long holiday runs from Feb. 2 in China.

Crude rubber stockpiles held at Japanese warehouses fell 1.2 percent to 6,238 tons on Dec. 31, according to data from the Rubber Trade Association of Japan.

China’s natural-rubber inventories were at 68,850 tons, based on a survey of 10 warehouses in Shanghai, Shandong, Yunnan, Hainan and Tianjin, the Shanghai Futures Exchange said Jan. 7. That was 55 percent lower than last year’s high of 151,832 tons.

May-delivery rubber in Shanghai gained 1.1 percent to close at 37,640 yuan ($5,686) a ton. The price reached a record 38,920 yuan on Nov. 11.

(Source: http://www.bloomberg.com/apps/news?pid=newsarchive&sid=amNIJxLS983A)