World Rubber Supply Tight, Price Outlook Bullish

World Rubber Supply Tight, Price Outlook Bullish

Jan. 26 (Bloomberg) -- Global natural rubber supplies are tight and the outlook is bullish on favorable fundamentals, the Association of Natural Rubber Producing Countries said.
“Exporting countries are oriented towards ensuring the best price,” said Djoko Said Damardjati, the association’s secretary general, in a newsletter. That will improve farm income and export earnings, he said. No producer nation “holds any buffer stock,” he said.
Prices doubled in 2009, the best performance since at least 1976, driven by optimism that demand was increasing as the world recovered from recession and as producers curbed supplies. The association includes Cambodia, China, India, Indonesia, Malaysia, Papua New Guinea, Singapore, Sri Lanka, Thailand and Vietnam. Total output represents about 94 percent of global supply.
“The statement is optimistic that prices could move up further,” said Umaporn Thepnuan, marketing official at Future Agri Trade Co. in Bangkok. Futures in Tokyo may climb to 350 yen per kilogram ($3,891 a ton) should they close above 303.8 yen, the highest end-session level since September 2008, she said, using price history as a guide.
Thailand, Indonesia and Malaysia, the three biggest growers, view the current price as appropriate and agreed to take steps to counter any negative trends, according to a joint statement after a meeting last week in Kuala Lumpur.
Tight Supply
The nations put on hold plans to curb exports as the economic recovery boosted prices and demand, the International Rubber Consortium Ltd., which represents growers and exporters, said Oct. 27. Supply was cut after prices fell to 99.8 yen a kilogram ($1,103 a metric ton) in December 2008, the lowest level since August 2002. The price has almost tripled since then to 284.6 yen a kilogram.
The industry is “passing through a situation of tight supply caused by a progressive decline in production and a marked rebound in demand,” Djoko said in the newsletter.
The association said it raised its prediction for output this year in Indonesia, the second-largest producer, to 2.77 million tons from 2.68 million tons. India’s production may total 853,000 tons, up from the previous estimate of 848,000 tons, it said. Vietnam may produce 770,000 tons, up from 680,000 tons, and exports will probably be 750,000 tons, it said, without giving estimates for other countries.
Total supply of natural rubber in association member countries declined 5.1 percent in 2009 to 8.7 million tons. The plantation area expanded to 7.13 million hectares at the end of 2009 from 7.02 million hectares a year earlier, it said.

Rubber Climbs for First Day in Three on Yen’s Decline, China
Jan. 26 (Bloomberg) -- Rubber advanced for the first time in three days as a weaker Japanese currency increased the appeal of yen-denominated contracts and on speculation China, the largest consumer, may step up purchases.
Futures in Tokyo jumped as much as 2.1 percent, rebounding from the three-week low reached yesterday. The yen declined after U.S. President Barack Obama’s endorsement of a second term for Federal Reserve Chairman Ben S. Bernanke boosted demand for higher-yielding currencies. China may increase purchases ahead of the Lunar New Year holidays next month, said Hisaaki Tasaka, an analyst at Tokyo-based commodity broker ACE Koeki Co.
“The market recovered as the yen’s rally stalled and as sales triggered by the U.S. bank plan subsided,” Tasaka said by phone today. “Focus is returning to fundamentals, including China’s activity ahead of the holidays.”
Rubber for June delivery rose as much as 6 yen to 292 yen per kilogram ($3,230 a metric ton) on the Tokyo Commodity Exchange and traded at 289.2 yen at 11:45 a.m. local time. The contract fell to 281.5 yen yesterday, its lowest since Jan. 4, after Obama last week called for investment limits on banks to help prevent another global financial crisis.
Rubber for July delivery, listed on the exchange today, traded at 292 per kilogram after opening at 290 yen.
May-delivery rubber on the Shanghai Futures Exchange climbed 0.5 percent to 24,710 yuan ($3,620) a ton at 10:45 a.m. local time. Prices recovered after slumping to a one-month low of 24,105 yuan on Jan. 22.
China Inventories
Natural rubber inventories grew 1,139 tons to 151,832 tons, the bourse said Jan. 22, based on a survey of 10 warehouses in Shanghai, Shandong, Yunnan, Hainan and Tianjin. That’s the most since November 2004.
“Rising stockpiles signal that Chinese buyers may be increasing rubber purchases,” ACE Koeki’s Tasaka said.
China’s week-long Lunar New Year holiday starts on Feb. 14 and precedes the peak-demand season. The nation surpassed the U.S. as the world’s largest car market last year, boosting demand for the commodity used in tires.
In the cash market, shippers in Thailand, the biggest exporter, are offering RSS-3 grade rubber for March shipment at $3.13 a kilogram, from last week’s peak of $3.25 reached Jan. 20, Tasaka said. Lower prices may also be attracting physical buying, he added.
Supplies in the global natural rubber market are tight and the fundamentals are favorable for prices, the Association of Natural Rubber Producing Countries said in a newsletter today.
The association estimated Indonesian output at 2.77 million metric tons in 2010, India’s at 853,000 tons and Vietnam’s at 770,000 tons.