Rubber Soars to Record as Thai Flooding Warning, China Growth Spur Demand

Rubber surged to a record as a flood warning in Thailand, the world’s largest supplier, spurred purchases, raising concerns that shortages of the commodity used in tires may worsen.

The June-delivery contract climbed to as high as 475 yen per kilogram ($5,778 a metric ton) in after-hours trading on the Tokyo Commodity Exchange. The trading of this session will be settled tomorrow. Rubber futures in Shanghai and the physical price in Thailand also advanced to all-time highs.

The “report on flood warnings triggered purchases, driving the TOCOM contract to an all-time high,” said Chaiwat Muenmee, an analyst at Bangkok-based DS Futures Co., by phone today. “Faster economic growth in China also boosted optimism demand will continue to expand,” he added.

Monsoon rains may cause flash floods and landslides in nine of Thailand’s southern provinces from Jan. 20 to Jan. 23, the Department of Disaster Prevention and Mitigation said in a statement today. Fourteen provinces in the south represent about 80 percent of the country’s rubber output.

China’s growth quickened to a more-than-forecast 9.8 percent in the fourth quarter, the statistics bureau in Beijing said today. That compares with a 9.6 percent annual gain in the previous three months. The median estimate in a Bloomberg News survey of 22 economists was 9.4 percent.

China, Japan

The 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. That compares with 9.2 percent in 2009. The nation’s standing as the world’s No. 2 economy may be confirmed on Feb. 14 when Japan reports gross domestic product for the fourth quarter.

The May-delivery contract in Shanghai gained as much as 0.8 percent to a record 40,220 yuan ($6,106) a ton.

Rubber has advanced 15 percent this month, extending last year’s 50 percent rally, as demand grew on rising car sales led by China and India. Supply may lag behind demand as Thai production, hurt by heavy rain last year, extends its decline as growers reduce tapping during the leaf-shedding season that begins in February, cutting latex output.

The cash rubber price in Thailand, the world’s largest exporter, extended gains to a record of 172.80 baht ($5.65) per kilogram today as rising car sales continue to boost demand, while some plantation areas have entered their low-production season, according to the Rubber Research Institute of Thailand.

Rubber production in Thailand during the season, which runs until May, shrinks by 45 percent to 60 percent from peak production, the Association of Natural Rubber Producing Countries has said. The low-production period occurs at the same time in northern Indonesia and Malaysia, lowering output, the group said.

(Source: http://www.bloomberg.com/news/2011-01-20/rubber-advances-to-record-on-accelerating-china-growth-tightening-supply.html)