Rubber Slumps To Two-Month Low As Chinese Car Sales Decline

Rubber slumped to the lowest level in almost two months after data showed car sales in China fell for the first time in at least 16 months, stoking concern demand for tires may weaken in the world’s largest auto market.
The August-delivery contract lost as much as 4.2 percent to 437 yen a kilogram ($5,311 a metric ton), the lowest level since Jan. 11, before trading at 437.4 yen on the Tokyo Commodity Exchange at 12:11 p.m.
Sales of passenger cars and minivans declined 0.4 percent from a year earlier to 880,027 last month, the China Passenger Car Association said yesterday (Mar 7). Sales dropped for the first time since at least September 2009 after fuel prices rose and the government ended incentives supporting vehicle sales.
“The sales decline raised concerns that rubber demand may slow,” Kazunori Kokubo, general manager at Tokyo-based broker Yutaka Shoji Co., said today (Mar 8) by phone.
Rubber surged to a record 535.7 yen Feb. 18 on speculation supply will fall short of demand, led by China’s vehicle sales.
Car-sales growth in China will be about 10 percent to 15 percent this year, the China Association of Automobile Manufacturers said Jan. 10. Total auto sales, which include cars, trucks and buses, jumped 32 percent last year to 18.06 million, according to the group.
“Chinese car sales may not grow as much as earlier expected, given rising fuel costs and the nation’s monetary tightening,” Hisaaki Tasaka, an analyst at broker ACE Koeki Co. in Tokyo, said today (Mar 8) by phone.
China raised the sales-tax rate on small cars this year to 10 percent from 7.5 percent, phased out subsidies for vehicle trade-ins in rural areas, and increased retail gasoline and diesel prices on Feb. 21. Lower taxes helped automakers including General Motors Co. and Volkswagen AG increase deliveries last year as overall vehicle sales surged 32 percent in the world’s largest auto market to a record 18.06 million.
“We believe market sentiment is changing due to rising gas prices, higher borrowing costs and overall tightening in the economy,” Scott Laprise, a Beijing-based analyst at CLSA Asia Pacific, said in a March 3 report.
Crude for April delivery traded at $104.89 a barrel in New York. Yesterday (Mar 7) the contract gained to $105.44, the highest settlement since Sept. 26, 2008, amid concern that unrest in the Middle East and North Africa may disrupt supplies.
Demonstrations have toppled leaders in Tunisia and Egypt and there have been protests in countries including Iran, Yemen and Oman. In Saudi Arabia, the biggest oil producer in the Organization of Petroleum Exporting Countries, websites have called for a nationwide “Day of Rage” on March 11 and March 20, according to Human Rights Watch.
In Shanghai, May-delivery rubber lost 2.9 percent to 37,540 yuan ($5,716) a ton. The physical price of Thai rubber dropped 1.1 percent to 181 baht ($5.94) a kilogram yesterday (Mar 7) as Chinese buyers have delayed purchases, waiting for prices to fall further, according to the Rubber Research Institute of Thailand. The price reached a record 198.30 baht on Feb. 21.
(Bloomberg, March 8, 2011)