Rubber Declines on Demand Concerns Following Japan’s Earthquake Crisis

Rubber declined amid concern that a disruption in car production caused by Japan’s record earthquake will continue, curbing demand for the commodity.
The September-delivery contract lost as much as 3.4 percent to 404.9 yen per kilogram ($4,930 per ton) on Monday (Apr 25), extending last week’s 3.7 percent slump, before settling at 405.2 yen on the Tokyo Commodity Exchange.
Toyota Motor expects production for all models to return to normal by November or December, as the world’s biggest carmaker struggles with supply-chain disruptions caused by Japan’s largest earthquake and tsunami on record.
Top tire maker Bridgestone plans to suspend production lines and limit operating hours at factories serviced by Tokyo Electric Power to save electricity during Japan’s summer.
“The auto industry is having difficulty recovering from damage caused by the quake, raising speculation that negative influences on rubber demand may be prolonged,” said Kazuhiko Saito, an analyst at broker Fujitomi.
Toyota will begin raising production to regular levels from July in Japan and from August at overseas plants, the carmaker said in a statement on Friday (Apr 22).
The company may lose production of 300,000 vehicles in Japan and 100,000 units overseas through the end of April because of quake-related shutdowns, executive vice president Atsushi Niimi said on Friday (Apr 22).
He added that Toyota was unlikely to meet its full-year global output target of 7.7 million units.
October-delivery rubber, which was listed on the Tokyo Commodity Exchange on Monday (Apr 25), settled at 395.9 yen after opening at 413 yen.
Rubber was also sold amid concern that China, the world’s largest consumer of the raw material, may increase interest rates further to curb inflation, capping demand, Saito said.
China’s consumer prices may rise between 5.2 percent and 5.5 percent in April, according to China International Capital.
“China demand continues to slow and its low level of stockpiles showed that the country used its own reserves rather than buying raw materials in the market,” said Chaiwat Muenmee, an analyst at commodity broker DS Futures.
China’s natural-rubber inventories reportedly fell for an 11th straight week, losing 1,222 tons to an eight-year low of 14,717 tons, based on a survey of 10 warehouses in Shanghai, Shandong, Yunnan, Hainan and Tianjin, the Shanghai Futures Exchange said on Friday (Apr 22).
The physical price of Thai rubber dropped 1.4 percent to 174.55 baht ($5.83) per kilogram on Monday (Apr 25), according to the Rubber Research Institute of Thailand.
Farmers in Thailand, Indonesia and Malaysia reduce tapping during the so-called wintering season from February to May, when trees shed leaves and latex production drops, according to the Association of Natural Rubber Producing Countries.
(Jakarta Globe, April 25, 2011)