Rubber Climbs to Record as China May Buy to Replenish Stockpiles

Rubber advanced to a record amid speculation that China, the world’s largest consumer, may step up buying to replenish stockpiles before the low-production period begins in major growing areas in Thailand. The Thai cash price also climbed to an all-time high.
The July-delivery contract climbed as much as 1.2 percent to 520 yen a kilogram ($6,247 a metric ton) before trading at 518.5 yen on the Tokyo Commodity Exchange at 12:46 p.m. local time.
Natural-rubber inventories monitored by the Shanghai Futures Exchange declined 615 tons to 58,058 tons, based on a survey of 10 warehouses in Shanghai, Shandong, Yunnan, Hainan and Tianjin, the bourse said Feb. 11. The volume was 62 percent below last year’s peak of 151,832 tons.
“China may have to increase rubber purchases to replenish stockpiles while supply is available,” Kazuhiko Saito, an analyst at broker Fujitomi Co. in Tokyo, said today (February 14) by phone. “Shipments from Thailand will dwindle in coming months as the low-production period begins.”
Farmers reduce tapping during the so-called wintering period from February to May, when trees shed leaves and latex production drops. Thai output declines as much as 60 percent compared with peak levels, according to the Association of
Natural Rubber Producing Countries. Indonesia and Malaysia will enter the low-production period about the same time. The seasonal drop in production is set to occur after La Nina brought higher-than-average rains to parts of Southeast Asia, curbing output in Thailand, Indonesia and Malaysia. The three countries account for about 70 percent of global supply.
Thai Record
The physical price of natural rubber  in Thailand, the world’s largest exporter, extended gains to an all-time high of 194.30 baht ($6.32) per kilogram today (February 14), according to the Rubber Research Institute of Thailand. The price gained as demand from tire makers expands, while supplies have decreased, the institute said.
Rubber futures have advanced 25 percent this year, extending last year’s 50 percent rally, as rising car sales led by China and India boosted demand for tires.
Car-sales growth in China, the world’s biggest auto market, will be about 10 percent to 15 percent this year, according to the China Association of Automobile Manufacturers. Total auto sales, which include cars, trucks and buses, jumped 32 percent last year to 18.06 million, the group said.
Natural-rubber consumption in China may rise 9 percent to 3.6 million tons this year, while rubber use in India may gain 5.2 percent to 991,000 tons, according to the Association of Natural Rubber Producing Countries.
Sumitomo Rubber Industries Ltd., Japan’s second-largest tire maker, raised its earnings estimate last week, citing strong sales of snow tires in the domestic market and expanding demand overseas. Bridgestone Corp., the world’s largest
manufacturer, announced increases of 8 percent to 15 percent in product prices for the Japanese market from June 1.
In Shanghai, May-delivery rubber gained as much as 1.6 percent to 42,350 yuan ($6,572) a metric ton, nearing a record 43,500 yuan reached on Feb. 9, and traded little changed at 42,695 at the midday break.
(Bloomberg, February 14, 2011)