Rubber Jumps to Record as Supply Concern Grows on Flood Warning

Jan. 21 (Bloomberg) -- Rubber futures in Tokyo and Shanghai reached records on concern that supply from Thailand, the top exporter, may decline, worsening a supply shortage, after the government issued a flood warning.

The June-delivery contract climbed as much as 2.7 percent to 478.1 yen a kilogram ($5,766 a metric ton) on the Tokyo Commodity Exchange and settled at 477.6 yen. The most-active contract climbed 5.1 percent this week, as demand expands on rising car sales led by China and India, outpacing weather- constrained supply.

Monsoon rains may cause flash floods and landslides in nine of Thailand’s southern provinces, the Department of Disaster Prevention and Mitigation said yesterday. The fourteen provinces in the south represent about 80 percent of the country’s total rubber output.

“The market is boosted by supply concern,” said Hisaaki Tasaka, an analyst at ACE Koeki Co. in Tokyo. “Thai shippers are bullish as weather conditions may worsen.”

The cash rubber price in Thailand reached a record 175.3 baht ($5.72) per kilogram today as supply shortages have lingered, while demand is increasing from the car industry, according to the Rubber Research Institute of Thailand. Some plantation areas have entered the low-production season, the institute said on its website.

“Buyers are still in the market despite high prices to secure the commodity amid increasing supply concerns,” said Wanwilai Choilek, manager at the Hadyai, Thailand branch of commodity broker DS Futures Ltd.

Output during the low season, which runs until May, can fall by 45 percent to 60 percent from the peak, according to the Association of Natural Rubber Producing Countries. The period occurs at the same time in northern Indonesia and Malaysia.

China Stockpiles

Futures also gained amid speculation that buyers in China, the largest consumer, may boost purchases to replenish reserves before the Lunar New Year holiday, Tasaka said. The week-long holiday starts Feb. 2.

Natural-rubber inventories in China declined 175 tons to 68,675 tons, based on a survey of 10 warehouses, the Shanghai Futures Exchange said Jan. 14. That’s 55 percent lower than last year’s peak of 151,832 tons.

China’s economy expanded 10.3 percent in 2010 to 39.8 trillion yuan ($6.04 trillion), the fastest pace in three years, the statistics bureau report showed yesterday. That compares with 9.2 percent in 2009.

China’s vehicle sales may grow 10 percent to 15 percent this year after jumping 32 percent to 18.06 million vehicles in 2010, according to forecast by the China Association of Automobile Manufacturers.

The May-delivery contract in Shanghai advanced as much as 2.1 percent to 40,985 yuan ($6,224) a ton.

(Source: http://www.bloomberg.com/apps/news?pid=newsarchive&sid=a6IcMjFMPGqQ)