Malaysia Rubber Output May Rise 17% to 1 Million Tons

Malaysia Rubber Output May Rise 17% to 1 Million Tons

March 9 (Bloomberg) -- Natural rubber output in Malaysia, the world’s third-largest grower, may rise 17 percent this year, lifting shipments of the commodity used in tires, the nation’s minister for plantation industries and commodities said.

Production may reach 1 million metric tons as farmers boost tapping to benefit from higher prices, Bernard Dompok said in an e-mail. Output last year was 856,189 tons.

Rubber futures traded in Japan have advanced 7 percent this year, after doubling in 2009, as production fell and the global economic recovery and government stimulus measures in China and U.S. boosted demand for tires. The price retreated from a one- week high today after Malaysia forecast an increase in output.

“Higher supply from Malaysia hurts market sentiment in the near term,” said Chaiwat Muenmee, an analyst at DS Futures Co. “That prompted some investors to unwind positions.”

August-delivery futures, the most-active contract, fell as much as 1.4 percent to 293.1 yen a kilogram before settling at 295.10 yen on the Tokyo Commodity Exchange. The drop ended a two-day, 4.5 percent winning streak.

Still, the global economic recovery “looks favorable for the natural rubber market to stay bullish amid a tight supply situation caused by a decline in regional production and a marked rebound in demand,” Dompok wrote in reply to questions.

Output during the seasonal low-production period between February and April, so-called “wintering season,” will surge in Vietnam, Malaysia and India, the Association of Natural Rubber Producing Countries said March 1.

Malaysian Exports

In Malaysia, low-season output will increase 43 percent to 243,000 tons, according to the group that represents Cambodia, China, India, Indonesia, Malaysia, Papua New Guinea, Sri Lanka, Thailand and Vietnam.

Malaysia’s exports of rubber and rubber compound may rise 6.2 percent this year to 1.2 million tons, Dompok said. Sales were 1.13 million tons last year, including 430,000 tons of compound rubber sold mostly to China, he said.

The government will maintain a minimum tappable plantation of 800,000 hectares and ensure that at least 25,000 hectares are replanted to meet the 1 million ton output target, Dompok said. It aims to increase the average productivity to 1,800 kilograms per hectare per year by 2020, from 1,450 kilograms, he said.

Imports will increase 1.5 percent to 750,000 tons this year to meet demand for compound rubber from China, and to supply domestic latex-goods manufacturers, he added.

Mixed trend in spot rubber

Kottayam, March 9

Spot rubber showed a mixed trend on Tuesday. Declines in the international futures and an unimpressive closing on NMCE kept sheet rubber under pressure and it finished unchanged at Rs 144 a kg on buyer resistance. The remaining grades including latex made moderate gains on fresh buying and short covering though the volumes were low. According to analysts, traders seemed to be ignoring key positive factors and seen weary about the financial year closing and clearing of books ahead of the same. There was no selling pressure in the market.

Futures firm

The March futures firmed up marginally to Rs 143 (142.90), April to Rs 148.10 (147.71), May to Rs 151.45 (150.78) and June to Rs 154.35 (153.93) a kg for RSS 4 on National Multi Commodity Exchange (NMCE). RSS 3 slipped at its March futures to ¥289.2 (¥289.4) (Rs 146.95), April to ¥289.6 (¥291), May to ¥290.7 (¥292.6) and June to ¥292.3 (¥294.2a kg during the day session on Tokyo Commodity Exchange. RSS 3 moved down to Rs 149.54 (150.60) a kg on Singapore Commodity Exchange (SICOM).

Spot prices were (Rs/kg): RSS-4: 144 (144); RSS-5: 142.50 (142); ungraded: 141 (140); ISNR 20: 142 (141) and latex 60 per cent: 93.50 (93).