Rubber Climbs to One-Month High as Supply in China Declines

By Aya Takada

June 28 (Bloomberg) -- Rubber advanced to a one-month high after data showed stockpiles in China, the largest consumer, declined to the lowest level in seven years.

Futures in Tokyo climbed to 288.6 yen per kilogram ($3,231 a metric ton), matching a high reached on May 28. The price gained 3.8 percent last week, booking the second weekly increase, as rainfall disrupted production in Thailand, the world’s biggest producer and exporter.

Natural rubber stockpiles monitored by the Shanghai Futures Exchange dropped 1,670 tons to 14,771 tons, the bourse said on June 25. It was the lowest level since January 2003, according to the Bloomberg data.

“Chinese buyers may have withheld rubber purchases amid speculation that the raw material prices would drop on a seasonal increase in production,” Kazuhiko Saito, an analyst at commodity broker Fujitomi Co. in Tokyo, said today by phone. “As rubber prices have stayed high,” they may step up buying to replenish inventories, he added.

Rubber for December delivery rose to 284.1 yen at 10:44 a.m. local time from its settlement of 278.6 yen on June 25. It has become the most-actively traded contract on the Tokyo Commodity Exchange after its listing on June 25.

November-delivery rubber on the Shanghai Futures Exchange added 1.7 percent to 22,265 yuan ($3,278) a ton at 9:47 a.m. local time. Earlier, it rose to 22,355 yuan, the highest level since June 2.

China Demand

China, the largest auto market, is the biggest consumer of natural rubber. The nation may increase gross imports of the raw material to 1.68 million tons this year, from 1.59 million in 2009, according to a May report from the Association of Natural Rubber Producing Countries.

The benchmark price in Thailand added 0.8 percent to 118.85 baht ($3.67) a kilogram, supported by limited supply and growing auto demand in many countries, the Rubber Institute of Thailand said June 25. The group, which reviews the price once a day, issues new data in the afternoon.

Rubber prices may climb 26 percent next year as supplies lag behind demand, according to Royal Bank of Scotland Asia Securities (Singapore) Pte.

Natural rubber may average $4,500 a ton next year, up from $3,580 a ton year-to-date, as “heavy rainfall in southern Thailand has disrupted supply” and “inventory levels in China are worse than we expected,” Nirgunan Tiruchelvam, a commodities analyst at the bank, said in an e-mailed report last week.

(bloomberg.com)

Climate change hits rubber productivity: Sajen Peter, Chairman, Rubber Board

 A commodity that has wide industrial use and is largely produced by one million small growers, rubber always makes headlines whenever there are price fluctuations. While growers try to maximise their returns from the crop, user industries try to minimise raw material costs. In the midst of these opposing pulls and pressures, the government is making crop-specific intervention through the Rubber Board and the latter has been effective in increasing the acreage under the crop. Sajen Peter, the chairman of the Board, who is completing his tenure this August, spoke to S Sanandakumar on a variety of topics ranging from supply and demand and the impact of climate changes. 

Climatic changes and their impact on crop production, including rubber, is a hot topic these days. What are your views on this phenomenon? 

It is an important area of inquiry as far as rubber is concerned. In fact, I was one of the first persons to raise the issue in 2007 at Brussels at the meeting of the Advisory Panel of International Rubber Study Group (IRSG). I said that the IRSG should study the phenomenon and even suggested that they join hands with the Association of Natural Rubber Producing Countries (ANRPC) for the study. We, at the Rubber Board, did a study using the data of the last fifty years and found that warm nights are increasing steadily. This has had an impact. The productivity of rubber trees in India which stood at 1,903 kg per hectare per year in 2008 was down to 1,796 kg per hectare per year in 2009. Climate change is a significant factor for this fall in productivity though other factors also might have contributed. 

What is the global demand for rubber? 

The western markets will take more time to come back to their earlier growth path. But this has been counter-balanced by the growth of eastern markets, especially India and China. In this context, let me remind you that the IRSG had anticipated that India will become the second largest consumer of rubber by 2015-2020 which happened last year because of the fall in the consumption in the US market by around 34%. It is difficult to retain this position. But the slow recovery in western markets might give India more time at the second slot. 

Is production increasing? 

Rubber cultivation is spreading. This year, the supply-demand gap is only 85,000 tonnes. However, we started with an opening stock of 2.40 lakh tonnes.

Is the area expansion in the North-East going as per plans? 

Yes. Our Fifth Plan target was to increase the area by 25,000 hectares in the North-East. So far, we have nearly 13,700 hectares under rubber plantation but this data is incomplete as it does not reflect the planted area for which subsidy has not been given. If we add that figure, the actual achievement would be close to target. 

Rubber trees are seen as an answer against global warming. Your comment. 

Yes. The green canopy of rubber is seen as an answer for global warming. But I am against the conversion of forest land for rubber cultivation. Only in the case of the North-East where jhum cultivation is practised, we do suggest rubber as an alternative. Also, I am against the conversion of land meant for food crops for rubber. To discourage this practice, we even deny planting subsidy in such cases where farmlands meant for food production are used for rubber cultivation. 

The user industry has approached the Delhi High Court on the issue of rubber price. What are your views on this? 

The government has set up a committee to study this as per the court order. As chairman of Rubber Board, I will be heading that committee and I still have to study the issues. But the amended Rubber Act clearly says that the question of fixing a minimum and maximum price for rubber is a matter to be decided by the government.

(economictimes.indiatimes.com)

Rubber Has Second Weekly Gain on Supply Concern, Tire Sales

By Aya Takada

June 25 (Bloomberg) -- Rubber climbed for a third day on speculation that rainfall will disrupt output in Thailand, the world’s largest producer, making it difficult for suppliers to meet growing demand from tire makers.

Futures in Tokyo gained as much as 1.5 percent, nearing a one-week high reached yesterday. The price climbed 3.8 percent this week, booking the second weekly increase.

Bridgestone Corp., the largest tiremaker, raised its first- half net income forecast by 37 percent yesterday, citing higher sales and overseas prices. The monsoon covering the Andaman Sea and the Gulf of Thailand is causing heavy rains in many parts of the country, according to the Thai Meteorological Department.

“Futures were supported by a strong cash price amid speculation rain may keep disrupting tapping in Thailand,” Kazuhiko Saito, an analyst at commodity broker Fujitomi Co. in Tokyo, said today by phone. “A bullish earnings outlook by Bridgestone was also positive to the market.”

November-delivery rubber gained as much as 4.3 yen to 285.2 yen per kilogram ($3,184 a metric ton) before settling at 284.7 yen on the Tokyo Commodity Exchange. The December-delivery contract, which was listed on the bourse today, settled at 278.6 yen after opening at 279 yen.

Bridgestone said yesterday net income in the six months ending June may be 37 billion yen ($413 million), compared with a previous projection of 27 billion yen. The company attributed the revision to increased tire sales and improvement in product prices in overseas markets.

Strong Demand

“Given the outlook, tire demand may remain strong for the rest of this year,” Saito said.

China, the world’s largest auto market, is the biggest user of natural rubber. The nation may increase gross imports of the raw material to 1.68 million tons this year, from 1.59 million in 2009, according to a May report from the Association of Natural Rubber Producing Countries.

Rubber prices may climb 26 percent next year as supplies lag behind demand, according to Royal Bank of Scotland Asia Securities (Singapore) Pte.

Natural rubber may average $4,500 a ton next year, up from $3,580 a ton year-to-date, as “heavy rainfall in southern Thailand has disrupted supply” and “inventory levels in China are worse than we expected,” Nirgunan Tiruchelvam, a commodities analyst at the bank, said in an e-mailed report.

The benchmark price in Thailand advanced 0.8 percent to 118.85 baht ($3.67) a kilogram, supported by limited supply and growing auto demand in many countries, the Rubber Institute of Thailand said on its website today.

November-delivery rubber on the Shanghai Futures Exchange added 0.4 percent to 21,890 yuan ($3,222) a ton at 3:00 p.m. local time.

(bloomberg.com)

Rubber, tea estates set to gain from rain, sunshine

C.J. Punnathara

Kochi, June 24

The intermittent rain and sunshine last week augurs a better crop for the rubber and tea plantations of South India, but is likely to dampen the cardamom production. Bouts of rains and sunshine is the ideal weather for rubber plantations since it augments better production as well as enable tapping operations, Mr N Radhakrishnan, former President of the Cochin Rubber Merchants Association, said.

The farmers were already enthused by the high reigning prices and these ideal weather conditions would have provided the final catalyst, Mr Radhakrishnan added. Also, almost 70-75 per cent of the plantations are reported to have undertaken rain-guarding of their trees to ensure that tapping continues unhindered even in the rains. However, arrivals to the markets have thinned out.

Renewed buying

And this had nothing to do with tapping or production but has more to do with speculation and holding back of stocks, sources in the trade said. The thinning arrivals were mainly due to the high prevalent prices which have prompted the farmer to hold back his stocks in anticipation that the price rise might be sustained into the coming days, the sources added. Reports of renewed buying by China from global rubber markets have also propped up the Indian rubber prices.

While international rubber sheet prices had often overtaken Indian prices in the recent past, sources pointed out that Standard Malaysian Rubber (SMR) prices were often reigning lower than the Indian prices. The corresponding domestic grade would be the Indian Standard Natural Rubber (ISNR) which is most often of a lower quality. While SMR is made from pure latex, ISNR is made from crump rubber, which is the residue from the hardened latex.

While the superior SMR prices are quoting in the Malaysian markets at Rs 135 a kg, the inferior ISNR prices are quoting over Rs 150, Mr Radhakrishnan said. This is mainly because of the weak demand for SBR from the developed markets of the West which were its traditional big importers. Most of the Asian markets trade in rubber sheets. Trade sources said that it would be feasible for India to import SMR at the current prices to stem the Indian price rise. However, they conceded that any news of imminent imports into India was likely to trigger price spiral in SMR.

Crop arrivals

Reports indicate that intermittent rains coupled with sunshine have resulted in a flush of new leaves in South Indian tea plantations and the crop arrivals have begun to pick up. And if the favourable weather condition persists, the crop in the coming months is likely to look up.

However, crops such as cardamom require huge amount of water and adequate amount of shade. The intermittent rains reported in several growing regions are reportedly not adequate to recharge the groundwater and ensure a good crop. But, we are only in the early part of the monsoon and consistent rains in the months ahead could very well change the outlook, farmers pointed out.

(thehindubusinessline.com)

Rubber price touches all-time high of Rs 173.50 a kg

NEW DELHI: The price of rubber today touched a new record high of Rs 173.50 per kg, mainly on account of high demand and tight supply. 

"It is a new record. Heavy rains have affected rubber tapping and there is strong demand simultaneously from the domestic tyre industry," Rubber Dealers Association President George Valy said. 

Also, growers are hoarding rubber as they expect prices to touch Rs 180 per kg, he noted, adding, "I will not be surprised if rubber quotes at Rs 175-176 a kg in a couple of days." 

Valy said that growers could be holding on to 1.5 lakh tonnes of stocks as of now. 

In addition to these factors, Cochin Rubber Merchants Association President N Radhakrishnan also attributed the movement in futures prices to the continuous rise in wholesale rates over the last five days. 

On the National Multi-Commodity Exchange (NMCE), the July futures contract for the commodity reached a high of Rs 174.87 a kg before closing at Rs 172.41 per kg. 

The price of natural rubber (RSS-4 variety) had stabilised at Rs 168-170.5 a kg only by the beginning of the month and remained within that range until June 19, after which it started rising steadily. 

Over the last two months, rubber rates had been fluctuating between Rs 172 (the last all-time high level) and Rs 149 a kg. 

Natural rubber production increased by 2 per cent to 54,600 tonnes in May, compared to 53,550 tonnes in the same month last year. 

The Rubber Board has projected an output of 8.93 lakh tonnes for the 2010-11 fiscal, 7.4 per cent higher than 8.31 lakh tonnes in FY'10.

(economictimes.indiatimes.com)

Rise in spot rubber prices

On Thursday (24 June 2010), the spot rubber prices rose following the gains in the domestic and international rubber futures. Sheet rubber increased to Rs 173.50 from Rs 172 per kg though the tyre sector continued to stay back as usual.

The July futures for RSS 4 rose to Rs 174.67 (172.41), August to Rs 168 (167.40) and September to Rs 163.30 (162.68) per kg on the National Multi Commodity Exchange.

Spot rates were (Rs/kg): RSS-4: 173.50 (172); RSS-5: 171.50 (170); ungraded: 169.50 (168); ISNR 20: 154 (153) and latex 60 per cent: 122 (121).

(indiainfoline.com)

Rubber Climbs on Expectations of Chinese Purchases, Slowing Thai Supplies

Rubber advanced for a second time in three days on expectations of Chinese buying as stockpiles fall and supplies from Thailand, the largest grower, increase at a slower pace than estimated.

Futures in Tokyo climbed as much as 0.5 percent to 279.1 yen per kilogram ($3,087 a metric ton) after falling 1.4 percent earlier today. The most-active contract is heading for a second weekly gain amid optimism that Europe’s sovereign-debt crisis may not substantially weaken demand for the commodity used to make tires and gloves.

“Heavy rainfall in southern Thailand has sparked worries that supplies may not be as much as expected,” Varut Rungkhum, analyst at commodity broker Agro Wealth Ltd., said by phone from Bangkok. “Low stockpiles in China also boosted optimism the biggest buyers will soon start building inventories.”

Rubber for November-delivery settled at 277.9 yen per kilogram, adding 0.1 percent from yesterday, on the Tokyo Commodity Exchange.

The November-delivery contract on the Shanghai Futures Exchange gained 0.1 percent to settle at 21,520 yuan ($3,161) a ton.

“Low level of rubber stocks in Japan and Shanghai” supported the market gains, said Hiroyuki Kikukawa, general manager of research at Tokyo-based IDO Securities Co.

China’s natural rubber inventories fell 1,440 tons to 16,441 tons, based on a survey of 10 warehouses in Shanghai, Shandong, Yunnan, Hainan and Tianjin, the Shanghai Futures Exchange said June 18. It is the lowest level since 2003, according to data compiled by Bloomberg.

China Imports

China, the world’s largest auto market, is the biggest user of natural rubber. The nation may increase gross imports of the raw material to 1.68 million tons this year, from 1.59 million in 2009, according to a May report from the Association of Natural Rubber Producing Countries.

Rains are spreading in southern Thailand, with heavy rains in some province, the Meteorological Department said on its website today. Thailand’s southern provinces represent 68 percent of total rubber plantation area.

“Nearby contracts will probably stabilize as production from Thailand will increasingly come onto the market,” Katsumi Kinoshita, senior manager for Institutional Department, Orion Koeki Co. Ltd., said by phone from Kobe.

Rubber for June-delivery gained as much as 2.8 percent to settle at 364 yen per kilogram.

Global rubber output may total 9.7 million to 10.2 million tons this year as drought and heavy rainfall in key producing countries including Thailand and Indonesia damage supply, Stephen Evans, the secretary-general of the International Rubber Study Group, said in an interview last week. That compares with the group’s forecast range of 10.1 million to 10.6 million tons on March 17.

Demand will probably increase by 4.4 percent this year to 9.8 million tons, based on the assumption that the economic recovery will slow, Evans said. The group forecast 10.2 million tons in March.

(bloomberg.com)