Panic sales drag spot rubber prices

Kottayam, Jan. 27

Spot rubber lost ground on Thursday. According to sources, the market fell on buyer resistance following the sharp declines in the domestic futures on the National Multi Commodity Exchange. An almost panic selling from dealers kept the prices under pressure.

Till December, the crop obtained was low due to intermittent rains and other disturbances. But from the beginning of January, the situation changed and the availability of the crop improved.

Now the harvest is almost steady but in spite of this inflow has not picked up mainly because the large growers are holding the stocks, said Mr Ibrahim Jalal, Treasurer, Indian Rubber dealers Federation.

For them, the scrap obtained from their plantations is enough to meet their day to day expenses and therefore the holding capacity has also strengthened, he said.

Sheet rubber declined to Rs 225.50 (232.50) a kg according to Dealers. The grade moved down to Rs 231 (235) a kg both at Kottayam and Kochi, according to the Rubber Board.

Futures slip

In futures, the February series nosedived to Rs 222 (230.92), March to Rs 227.24 (236.49), April to Rs 239.25 (245.69) and May to Rs 245.00 (250.97) a kg for RSS 4 on the NMCE.

RSS 3 (spot) closed at Rs 262.86 (261.95) a kg at Bangkok. February futures weakened to ¥472.5 (Rs 259.72) a kg in the night session on the Tokyo Commodity Exchange.

Spot rates were (Rs/kg): RSS-4: 225.50 (232.50); RSS-5: 220 (222.50); ungraded: 214 (218); ISNR 20: 224 (225) and latex 60 per cent: 152 (153).

(Source: http://www.blonnet.com/2011/01/28/stories/2011012852112100.htm)

Rubber Demand to Grow 4.6% in 2011, Outpace Supply, Group Says

Natural rubber demand may grow 4.6 percent this year, boosted by strong vehicle sales, with consumption continuing to outpace supply in coming years, according to the International Rubber Study Group.

Global consumption may gain to 11.2 million metric tons in 2011 and 11.6 million tons next year, said Stephen Evans, the group’s secretary general. The supply deficit will support prices of the commodity used to make tires and gloves, he said.

Rubber gained to a record this week, extending a 50 percent advance in 2010, as rising car sales led by China and India boost demand, and rains disrupted tapping in key growing nations ofSoutheast Asia. Natural rubber demand in China, the biggest consumer, may rise 9 percent this year, said the Association of Natural Rubber Producing Countries.

“From the fundamental point of view, we don’t see relief coming in the next few years because of over-demand and undersupply,” said Evans. “The price is likely to stay firm,” he said.

Demand may rise further to 13.1 million tons in 2015 and 15.4 million tons in 2020, while production may be about 13.8 million tons, said Evans. The estimates are based on normal production conditions, excluding a potential increase in supply from new plantings and increased tapping driven by high prices, he said.

Above-average rain from a La Nina weather event has curbed output in Indonesia, Malaysiaand Thailand, the biggest producer. The weather pattern may last until the middle of the year, causing higher-than-usual rainfall in Thailand during January to April, the Thai Meteorological Department has said.

Further Tightness

“If the demand stays strong, we’ll see further tightness in the market,” Evans said. Still, it isn’t “worrisome, as high prices will encourage tappers,” he said.

The most-active contract on the Tokyo Commodity Exchange gained as much as 3.2 percent today to 474.8 yen per kilogram ($5,725 a ton).

Futures fell 4.6 percent in the past two days after reaching a record 484.9 yen on Jan. 24 on worries China may take additional steps to curb inflation, reducing demand. China raisedinterest rates twice in the fourth quarter in a bid to choke off inflation.

“In the fast-moving economy like China, even a significant move may not be enough to slow it down,” Evans said. “There is no fundamental evidence that demand will go off a cliff.”

Natural rubber consumption in China may rise to 3.6 million tons this year and India’s consumption may gain 5.2 percent to 991,000 tons, according to the Association of Natural Rubber Producing Countries.

China Growth

China’s economy grew 10.3 percent in 2010, the fastest pace in three years and up from 9.2 percent a year earlier, the government said this month. China’s vehicle sales may grow 10 percent to 15 percent this year after jumping 32 percent to 18.06 million vehicles in 2010, according to a forecast by the China Association of Automobile Manufacturers.

Natural-rubber supply from members of the Association of Natural Rubber Producing Countries, which represent 92 percent of global supply, may expand 4.8 percent this year to about 9.9 million tons, the group said Jan. 25. The forecast is lower than an “optimistic target” by member governments of 7.7 percent growth to 10.2 million tons, it said.

The International Rubber Study Group counts 16 countries plus the European Union as members, according to its website. Thailand and Malaysia, the world’s largest and third-largest producers, are part of the group, while Indonesia, the second- largest grower, is not.

(Source: http://www.bloomberg.com/news/2011-01-27/natural-rubber-demand-to-expand-4-6-in-2011-outpace-supply-group-says.html)

Sri Trang prices Singapore share offer amid some confusion

Sri Trang Agro-Industry, a leading rubber producer in Thailand and globally, is set to become the first Bangkok-listed company to have a dual listing in Singapore after yesterday fixing the offer price at S$1.20 per share. This allowed the company to raise S$336 million ($262 million).
The share offer didn’t come without its difficulties, however. The pricing had to be postponed from Monday after the Thai market suffered its biggest plunge in 15 months and yesterday morning the company issued a statement on the Stock Exchange of Thailand’s website saying the deal had been cancelled, only to retract it some 50 minutes later, saying the deal was still on.
The two statements understandably caused a lot of confusion among investors and existing shareholders and, when the stock resumed trading in Bangkok after a two-day suspension, the share price plunged as much as 15.6%. It recovered some of those losses during the day and finished the session 10.2% lower at Bt33. By then, the company had priced the Singapore share offer, which eased the earlier confusion.
However, the price was fixed a full 25% below the earlier announced maximum price of S$1.60 and some 12% to 15% below the range where most investors had been willing to buy the shares last week, according to sources. Importantly, the Singapore price was also set at a 21% discount to the latest trading price in Bangkok last Friday, which obviously added to the pressure when the stock resumed trading one hour into the morning session yesterday.
That said, yesterday’s sell-off in the stock was also a delayed reaction to the 4.3% decline in the benchmark SET index on Monday when Sri Trang was suspended. The Thai market lost a combined 7.3% in the four days from Thursday to Tuesday as investors grew increasingly nervous about the ongoing protests by nationalist demonstrators, initially triggered by a border dispute with Cambodia.
Indeed, the fact that Sri Trang closed well above the Singapore offer price yesterday should probably be taken as a sign that investors recognise the underlying fundamental value of the company – even if they require a substantial discount to take on the exposure right now. The S$1.20 offering price in Singapore is equal to Bt29 per share, which means Sri Trang’s Bangkok-listed stock closed at a 13.8% premium to the offer price yesterday. The rubber producer is due to start trading in Singapore on Monday next week after the debut was pushed back by one day due to the delayed pricing.
The announcement yesterday morning that the deal had been cancelled was a mistake by the company, although the fact that someone thought that this was a possible outcome suggests that there had been discussions about a postponement. In the notice, the company referred to the “unfavourable conditions in the capital markets and volatility since late of last week” which it said “affects the investment decision of the international investors (as well as) price and demand of the shares of the company to be issued and offered to investors”.
However, sources close to the Singapore offering said that investors were still interested in the stock at the lower price and, after giving them an extra couple of days to re-evaluate the situation, most of the earlier orders were reconfirmed. Some new orders also materialised on Tuesday as the price was lowered, perhaps as investors recognised a greater potential for arbitrage opportunities between the shares listed in Singapore and Bangkok, which are fully fungible. According to the sources, most investors had previously been willing to buy the Singapore shares at a price equivalent to about Bt33 to Bt34.
While clearly not a blow-out – less than 50 investors participated in the offering -- there was sufficient demand for all orders to be scaled back somewhat. The buyers comprised global funds, including some tier-1 accounts and sovereign wealth funds; Malaysian investors and some London accounts with a good understanding of the plantation industry; short-term money; and some existing shareholders currently holding the Bangkok-listed shares.
Sri Trang offered 280 million new shares through the Singapore share offering, which equals 21.9% of its enlarged share capital. Five percent of the deal was earmarked for Singapore retail investors, while the remaining 95% was placed with institutional investors.
J.P. Morgan acted as global coordinator for the offering as well as joint bookrunner together with CIMB and Standard Chartered. The three banks did some pre-marketing in early January and the company kicked off a roadshow to Asia and London on January 13. The maximum price of S$1.60 was announced a week later. The Bangkok share price fell 10.4% during the roadshow from a record high of Bt41 just before.
Sri Trang, which has been listed in Bangkok since 1991, had a massive year last year amid a 50% rally in rubber prices. The share price surged 696% which, according to Bloomberg, made it the best performing stock among the 479 stocks in the SET index. The company is also a direct play on the rapidly-growing demand for cars primarily in India, China, Asean and South America, as the tyre industry accounts for more than 70% of the global demand for natural rubber. Following the sharp gains, Sri Trang now has a market cap of about $1.1 billion and, based on yesterday’s closing price, it trades at a 2011 price-to-earnings multiple of 9.4 times. The Singapore offer price was fixed at 8.0 times next year’s earnings.
Despite the impressive gains in its Bangkok-listed shares, Sri Trang wasn’t able to complete an attempt to list in Singapore last summer. The company called off the attempt in late August, citing global market uncertainties. At that time, it was expected to be able to fetch about Bt19 per share, which means that even with the significant discount this time around, the delay worked out in the company’s favour.
Sri Trang is present across the value chain, from rubber plantations to processing and sales and distribution. Through various associates, it is also involved in the downstream production of examination gloves and high-pressure hydraulic hoses. In 2009, it had a 15.2% share of rubber production in Thailand, which is the largest producer of natural rubber in the world with about one-third of the total production. On a global scale, Sri Trang’s sales volumes in 2009 accounted for about 8.2% of global demand. Its key customers include Goodyear, as well as tyre manufacturers in emerging markets like China and India.
In addition to its rubber plantations in Thailand, the company also has raw material procurement centres and 21 processing plants in Thailand and Indonesia, sales and distribution operations that are managed out of Singapore, as well as a global purchasing hub for key users of natural rubber and distribution and warehousing facilities in China. And the company continues to increase its global footprint with plans to build nine new plants for technically specified rubber (TSR), which is used to make tyres, in Thailand and Indonesia by 2012. This will increase its total annual production capacity to 1.5 million tonnes from 860,259 tonnes at present. It is also looking to acquire approximately 8,000 hectares of land in Thailand and Indonesia and other suitable areas over the next four years to grow more rubber trees.
According to the Singapore listing prospectus, the company generated Bt46 billion ($1.5 billion) of revenues in 2009, which it converted into a pre-tax profit of Bt2.6 billion. In the first nine months of 2010 it added significantly to this with revenues of Bt61.3 billion and a pre-tax profit of approximately Bt3.5 billion.

(Source: http://www.financeasia.com/News/246161,sri-trang-prices-singapore-share-offer-amid-some-confusion.aspx)

China CPCIF suggests regulating rubber prices to rescue tire industry

BEIJING, Jan 26, 2011 (Xinhua via COMTEX) --

China Petroleum and Chemical Industry Federation (CPCIF) has called for regulatory measures taken by related authoritative departments on natural rubber prices in a bid to ease tire industry's cost pressure including selling of reserve rubber, and cut or cancellation of import tax.

Since the fourth quarter of last year, domestic natural rubber prices have been rising persistently and have already topped 40,000 yuan/tonne. With soaring rubber prices, the downstream tire industry has incurred losses on the whole.

Decreasing self-sufficiency of natural rubber is a key reason to trigger price rise. In 2005, the self-sufficiency rate dived under the internationally recognized security line of 30 percent, and continued to remain at low levels in the following years, 25 percent in 2007, 22 percent in 2009 and likely 20 percent in 2010.

CPCIF held that cost pressure, demand expansion and adverse weather are three factors to prop up prices of natural rubber.

As natural rubber prices are rising crazily, tire industry will suffer losses and the downstream automobile and machinery industries are expected to be affected given the 20 percent of import tax rate on prices and 2,000 yuan/tonne on volume, many tire enterprises said.

In the short term, rubber prices can only be stabilized by selling state stockpiles and removing import tariff, an unnamed industry noted. (Edited by Liu Xiaoyun, liuxy08@xinhua.org)

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(Source: http://www.tradingmarkets.com/news/stock-alert/snp_china-cpcif-suggests-regulating-rubber-prices-to-rescue-tire-industry-1448600.html)

Hankook Moves Forward With Indonesia Plant

Hankook Tire recently shared its future vision for a collaborative partnership and mutual growth with Indonesia at a welcoming ceremony held by the Indonesia Investment Coordinating Board in Jakarta.
Hankook announced its investment plan to build a new manufacturing plant in Bekasi, Indonesia, in December 2010. The company says the large-scale global production center will enable it to become the world’s fifth largest tire company, achieving an annual output of 100 million units by 2014.
“Hankook Tire is excited to build a new growth engine in Indonesia which would strengthen the company’s top position in the global market by responding to the customer needs in quality and productivity,” said Hyun Bum Cho, executive vice president of Hankook Tire. “By establishing a large-scale production base, we would also contribute to Indonesia’s social and economic growth as we had achieved through our existing partnerships with China and Hungary.”
“We are positive that the new plant and the government support that has been displayed by the Ministry of Industry thus far would help Hankook Tire reach its goals for sustainable growth,” said Gita Wirjawan, chairman of the Indonesia Investment Coordinating Board.
(Modern Tire Dealer, January 27, 2011)

Auto Cos May Import Tyres to Meet Shortfall in India

For customers looking at early car deliveries in 2011 may have to wait a little longer, as manufacturers facing severe tyre shortages in local market are now hunting in China, Thailand, Korea and Malaysia to meet their new production targets. Car companies are looking at importing tyres to make up for the shortages that are affecting their 2011 production plans.
Already facing component shortages that led to lower production for most car companies in 2010, major carmakers like Maruti Suzuki India , Tata Motors and Hyundai Motors are planning import of tyre, anticipating a 25% increase in production in 2011 from the 28.14 lakh cars produced in 2010 calendar year.
Indian carmakers claim that tyre shortages in the domestic market have forced them to venture overseas, as the local manufacturers couldn’t meet their required demand.
“Inconsistent supply of tyre has hampered production for the major part of 2010. Keeping in view the higher production targets of 2011, we have planned tyre purchase overseas markets for meeting our long-term commitments, as we aim a 14-lakh units production in next fiscal ,” said a senior executive of Maruti Suzuki, who preferred not to go on record.
Shortages for tyres come as carmakers are already at loggerheads with component suppliers with shortages of several critical parts affecting production. Carmakers say that sufficient component supply would have helped them to produce 20% more cars in 2010. Lower production has led to long waiting period of up to 4-5 months on many popular cars like the Maruti Swift, Volkswagen Polo, Toyota Innova.
Taking contingency measures, the Indian car industry that consumed over 10 million tyres in 2010 feels that supplies of tyres in the domestic market could fell short by around 10% of their demand and wants to fill their gap by imports. There are many factors which have affected auto production in India. While components were in short supply as demand peaked in the past few months, we do not anticipate an immediate solution in the shortterm and availability of tyres is a matter of concern,” said Pawan Goenka, president, Society of Indian Automotive Manufacturers , who also head automaker Mahindra & Mahindra Ltd.
The decision of carmakers comes after major truck and bus manufacturers like Tata Motors and Ashok Leyland are already importing tyres from China and Thailand to offset shortages in the domestic market. While shortages has been a long-drawn issue, the abnormal increase in prices of raw material prices in 2010 created several production problem to the Indian tyre sector. The increase in natural rubber prices that currently peaked to. 207/kg has forced domestic tyre companies to divert more supplies to used market that fetch higher margins.
Typically most tyre companies supply 60-65 % production to carmakers and the rest is targeted to after market, but in 2010 on the back of spiralling production cost, most tyre players restricted supplies to carmakers to 50% of their production. Automotive Tyre Manufacturers’ Association says that supplies is a commercial decision and despite facing tougher times, Indian tyre industry is increasing production capacities that would facilitate high availability in coming months.
“Keeping in view the buoyant market, several tyre companies are investing into new capacities that would cater to the increased demand . While current production is also adequate for the domestic automakers, importing tyres from overseas markets could also be a commercial decision, as some of the imported tyres are cheaper than the Indian ones,” ATMA director general Rajeev Budhiraja said.
(The Economic Times, India, January 27, 2011)

Price of rubber doubled last year

By Dianne Silva

The price obtained from rubber production has doubled from year 2009 to 2010, according to the Ministry of Plantation Industries.

“The price of one Kg of rubber on average in 2009 was Rs.202.79 but in 2010 it was Rs. 402.75,” Minister of Plantations industries Mahinda Samarasinghe said.

He said rubber production had also increased from 137,000 metric tonnes in 2009 to 150,000 metric tonnes in 2009. In certain instances the price goes up to Rs. 570 or 580, he added.

However the Minister was unclear on the figures of how much loss the industry incurred due to the inclement weather conditions in the past months.   He stated that at present demand overrode the necessary supply and expressed his hope that local produce could fulfill the total requirement needed for the production of value added rubber products.

(Source: http://print.dailymirror.lk/news/news/34134.html)