Rubber Futures in Tokyo Advance as China, India Demand May Exceed Supplies

Rubber, set for a second weekly decline, climbed on concerns that demand may outpace supply during the low-production season in Southeast Asia.

The September-delivery contract advanced as much as 3.1 percent to 425 yen per kilogram ($5,200 a metric ton) and traded at 421.2 yen on the Tokyo Commodity Exchange at 10:43 a.m. Futures are set for a 3.1 percent decline this week.

“Rubber demand from China and India is still high, while supply remains low in the short term,” said Masahiro Tamagawa, senior manager at H.S. Futures Co. Prices are in so-called backwardation, when nearby contracts are more expensive than long-term ones, he said.

Consumption in China, the largest buyer, is expected to grow by 6 percent this year to 3.5 million tons, the Kuala Lumpur-based Association of Natural Rubber Producing Countries said in a March report. India’s demand may rise 5 percent to 991,000 tons, it said.

Michelin & Cie., the world’s second-largest tire maker, said first-quarter revenue rose 28 percent 5.05 billion euros ($7.36 billion), led by surging demand for speciality tires to equip construction equipment and agricultural vehicles.

Thai output may decline from last year if rains that caused floods persist, according to the Thai Rubber Association. Production may be 3.2 million tons this year, Luckchai Kittipol, president of the group, said April 21. That compares with last year’s 3.25 million tons and an earlier 2011 target of 3.49 million tons.

Thai Output

Unseasonal rains from the start of this year in Thailand caused floods in 10 southern provinces in March that may have damaged about 50,000 rai (19,641 acres) of rubber plantations, according to the Department of Disaster Prevention & Mitigation. Water levels have since receded, it said.

Farmers in Thailand, Indonesia and Malaysia reduce tapping during so-called wintering, from February to May, when trees shed leaves and latex production drops, according to the Association of Natural Rubber Producing Countries.

The physical price of Thai rubber was unchanged at 177.05 baht ($5.90) per kilogram yesterday, according to the Rubber Research Institute of Thailand.

Rubber for September delivery in Shanghai advanced as much as 2 percent to 35,195 yuan ($5,420) a ton before trading at 35,135 yuan at 09:09 a.m. local time.

(Source: http://www.bloomberg.com/news/2011-04-22/rubber-futures-in-tokyo-advance-as-china-india-demand-may-exceed-supplies.html)