Rubber Prices to Stay ‘High’ Until June, IRCO Says

Rubber Prices to Stay ‘High’ Until June, IRCO Says

April 28 (Bloomberg) -- Natural rubber prices will remain “high” until at least June as supplies from the three biggest producing countries remain tight and demand for tires from automakers expands, a producers’ group said.

“Prices will sustain high levels in the first half of this year, with increasing car sales and positive economic indicators,” Abdul Rasip Latiff, chief executive officer of the International Rubber Consortium Ltd., said in an interview. The consortium represents the three biggest producing nations.

The average physical price of natural rubber from Thailand, Indonesia and Malaysia will be about $3.20 to $3.30 per kilogram in the second quarter, Abdul Rasip said. The price has averaged about $3.19 this year.

Futures in Tokyo have gained 11 percent this year after more than doubling in 2009 as the global economy recovered from the worst postwar recession and government incentive programs in China and the U.S., the two biggest auto markets, revived vehicle sales. Limited supply this year during the annual low- output season has driven cash prices to all-time highs.

The benchmark price, excluding freight and insurance, of Thai RSS-3 grade rubber for May delivery declined to 130.05 baht ($4.03) per kilogram from a record 130.55 baht yesterday, according to the Rubber Institute of Thailand.

The auctioned price of RSS-3 fell 1.2 percent to 118.55 baht as some buyers shifted to cheaper supplies from Indonesia, the institute said today.

‘Too Volatile’

Rubber for October delivery on the Tokyo Commodity Exchange, the most-active contract, fell 1.9 percent to 305.8 yen ($3.23) a kilogram, the lowest closing price since March 25. The contract slumped 4.7 percent in the past two days. The May- delivery contract dropped 0.4 percent to settle at 428 yen after surging 20 percent in the previous six days.

“The near-term contract will be influenced by the low supply,” Roka Komiya, a trader at Marubeni Corp., said by phone from Singapore. Prices will stay around current levels through the end of June if supply doesn’t pick up, he said.

The market has been “too volatile,” Yium Tavarolit, IRCO’s economist, said in an interview in Bangkok yesterday. “That makes it very difficult for all stakeholders to manage costs, as they don’t know where prices will be,” he said.

IRCO represents growers and exporters in Thailand, Indonesia and Malaysia, which harvest about 7 million metric tons a year, equivalent to about 70 percent of the world’s natural rubber output.

Yields Falling

Supply, which typically improves after the end of the low- output period in April, may continue to be affected because of low yields, the Association of Natural Rubber Producing Countries said in an April newsletter. Existing trees in the biggest producing nations were mostly planted during 1980s and yields are falling, the association said.

Thai rubber production in April and May this year is likely to be similar to last year, with delayed rainfall threatening to cut output in May, according to the Thai Rubber Institute. Production last year totaled 200,000 tons in April and 190,000 tons in May.

Tight supplies will likely ease after the middle of May as increased production begins to appear on the market, Abdul Rasip said. The three biggest producers enter a low-output season from February to April every year, when rubber trees shed leaves and latex output slows.

‘Remain Tight’

“Although the supply will increase, it will remain tight compared with growing demand,” Abdul Rasip said.

Passenger car sales in China rose 76 percent to 3.32 million units in the first quarter, according to the China Association of Automobile Manufacturers. Bridgestone Corp., the world’s biggest tire maker, plans to boost production in China by 43 percent this year to 100,000 metric tons and increase output by 16 percent in Japan.

Natural rubber consumption may rise by 9 percent in 2010 to about 10.4 million tons, according to the International Rubber Study Group’s March forecast.

Imports by China will increase if the country revalues its currency, “as they’ll pay less yuan to buy rubber, and that is good for exporting countries,” Yium said. A stronger yuan would make rubber imports cheaper, boosting competition among tire producers.

China may allow its currency to appreciate by June 30 to curb inflation, a Bloomberg survey of analysts showed this month.

Political unrest in Thailand, the largest producer and exporter, hasn’t affected rubber production or exports, Abdul Rasip said. “We don’t see any problem,” he said.

Antigovernment protesters have demonstrated for almost seven weeks, paralyzing the capital Bangkok, where recent violence killed 26 people. Most Thai rubber is produced in the south of the country.

Spot rubber turns weak

Kottayam, April 28

Physical rubber prices turned weak on Wednesday. The market lost ground following the declines in the domestic and international rubber futures. Sheet rubber dropped to Rs 168 from Rs 169 a kg mainly on buyer resistance. There has been no selling pressure on any grade as supply concerns continued to haunt the main marketing centres.

Futures decline

The May futures declined to Rs 166.30 (168.16), June to Rs 168.57 (170.53), July to Rs 167.05 (169.63) and August to Rs 164.40 (166.59) a kg for RSS4 on National Multi Commodity Exchange. The May futures weakened to ¥428 (Rs 203.04) from ¥429.5, June to ¥362 (¥364.5), July to ¥335 (¥340.2), August to ¥318 (¥324), September to ¥310 (315.9) and October to ¥305.8 (¥311.8) a kg for RSS 3 during the day session on Tokyo Commodity Exchange. RSS 3 fell sharply to Rs 175.57 (179.42) a kg on Singapore Commodity Exchange (SICOM). It (spot) closed at Rs 179.49 (180.12) a kg at Bangkok.

Spot rates were (Rs/kg): RSS-4: 168 (169); RSS-5: 166 (167); ungraded: 163.50 (165); ISNR 20: 160 (161.50) and latex 60 per cent: 106 (106).

Rubber Declines to One-Month Low as Debt Concerns Cut Appeal


April 28 (Bloomberg) -- Rubber tumbled to a four-week low after credit-rating downgrades of Greece and Portugal stoked concern that debt-laden nations may be moving closer to default, prompting an increase in risk aversion among investors.
Futures in Tokyo fell 1.9 percent to 305.8 yen a kilogram ($3,278 a metric ton), the lowest closing price since March 25, extending a decline from a 21-month high of 338.5 yen reached on April 16 and heading for its worst monthly performance since September.
Asian stocks fell, extending a global rout, after the rating downgrades spurred concern Europe’s debt crisis may derail the global economic recovery.
“Rubber came under pressure along with other commodities as concern about European debt problems spurred investors to cut their holdings of risk assets,” Takaki Shigemoto, an analyst at research and investment company JSC Corp. in Tokyo, said today.
Greece’s credit rating was cut three steps to BB+, or junk, by Standard & Poor’s, the first time a euro member has lost its investment grade since the currency’s 1999 debut.
Standard & Poor’s also warned that bondholders could recover as little as 30 percent of their initial investment if the country restructures its debt. The Greek move came after the rating company reduced Portugal by two steps to A-.
“Concerns about European budget issues are increasing again and that’s discouraging people from putting their money into risky assets,” said Hiroichi Nishi, an equities manager at Nikko Cordial Securities Inc. in Tokyo. The MSCI Asia Pacific Index fell 1.6 percent to 125.11 as of 10:22 a.m. in Tokyo.
Rubber futures have gained 11 percent this year as the global economy recovered from the worst postwar recession, boosting raw material demand. The market was also supported by a seasonal decrease in supply from Thailand, the largest producer.
Cheaper Supplies
The free-on-board price, which excludes freight and insurance, of Thai RSS-3 grade rubber for May delivery fell to 130.05 baht ($4.03) per kilogram from a record 130.55 baht touched yesterday, according to the Rubber Institute of Thailand.
The auctioned price of RSS-3 fell 1.2 percent to 118.55 baht a kilogram as some buyers shifted to cheaper supplies from Indonesia, the institute said.
The rubber market will stay supported by a faster-than- expected global economic recovery and by accelerating growth in demand, the Association of Natural Rubber Producing Countries said in an April newsletter.
Natural rubber prices will remain high until at least June as supplies from the three biggest producing countries remain tight and demand for tires from automakers expands, Abdul Rasip Latiff, chief executive officer of the International Rubber Consortium Ltd., said in an interview yesterday.
The average physical price of natural rubber from Thailand, Indonesia and Malaysia will be about $3.20 to $3.30 per kilogram in the second quarter, “based on fundamentals,” Abdul Rasip said. The price has averaged $3.19 this year,
September-delivery rubber on the Shanghai Futures Exchange tumbled 2.3 percent to settle 23,385 yuan ($3,426) a ton.
(businessweek.com)


High input cost likely to send tyre prices north
Posted: 27 Apr 2010 04:14 PM PDT
Mumbai: Tyre manufacturers Bridgestone India, Apollo Tyres and Ceat are looking to raise prices. Over the last two quarters, rubber prices have risen 60-70% and are hovering at Rs 150 per kg. The tyre price increase will be the third in four months. Since January, tyre prices have gone up 8-10%.

Bridgestone India said it had increased prices by 3.5% (cost to the dealer) starting today. Hiromi Tanigawa, managing director, Bridgestone India Private Ltd, said:

“It will all depend upon the raw material prices. If there is an increase in the raw material prices, we will also increase our prices and pass on the burden further.” Apollo Tyres and Ceat plan an increase by May.

Rubber comprises 40% of the cost of a tyre. Any fluctuation in the commodity impacts the cost of production and margins of the makers, said a Mumbai-based analyst. “The makers have been of late increasing prices in tandem with the increase in the raw material prices,” she added. The makers have managed this on the back of strong demand in the market and supply-demand mismatch on the final product side.

“Tyre makers are operating at 100% capacity utilisation. Citing the hardening rubber prices, the margins of the tyre makers are expected to remain under pressure, but will smoothen up in the short-term,” said Vaishali Jajoo, an auto analyst with Angel Broking.

Auto makers like Mahindra & Mahindra (M&M) and Tata Motors, among others, have lately pointed out the mismatch in supply from component makers, specifically from tyre makers. Though they had hinted on the improving situation, there is still a long way before balance is maintained between supply and demand.

(financialexpress.com)





Demand-driven bullish phase traps rubber
Posted: 27 Apr 2010 04:12 PM PDT
Kochi April 27
A faster than expected global economic recovery and the resultant acceleration in demand for natural rubber are likely to dominate sentiments in the global rubber markets in the short to medium-term. Also, global demand is likely to receive a further boost as a section of tyre manufacturing industry which stayed away during the wintering months are expected to re-enter expecting better availability in the coming months, the Association of Natural Rubber Producing Countries (ANRPC) has said.
Over 45 per cent of the global demand for rubber comes from China, India and Malaysia. The data on import and consumption of rubber in these countries during the first quarter this year reveal that natural rubber has already entered into a demand-driven bullish phase. While consumption in India rose 12.8 per cent, imports have soared by 124 per cent. More demand is expected in the months to come as the installed capacity to manufacture bus and truck tyres is poised to more than double, the Automotive Tyre Manufactures Association has pointed out.
“The likelihood of prices slipping this year is quite remote. In fact, as demand firms up in the months to come, prices are likely to improve further in the coming days.
Indications are that global spot prices could breach the $4-mark in the not-too-distant future” said Mr N. Radhakrishnan, former President of the Cochin Rubber Merchants Association.
Consumption in China increased 29 per cent during the first quarter, while natural rubber imports soared 70 per cent. Malaysia has posted 13 per cent growth in consumption, while imports rose 28 per cent.
Like India, Malaysia is also fast becoming a net importer of natural rubber. Preliminary indications are that Malaysia imported 1,83,000 tonnes of rubber in first quarter.
In the days to come, Malaysian demand is likely to be fuelled by greater demand from the domestic glove industry as the US has stepped up its health bill by $ 940 billion.
Global production
Even as consumption and imports into the major-consuming countries have registered double-digit growth, global production is expected to rise moderately by 6.2 per cent during the current year, the ANRPC that accounts for 94 per cent of the global production and supply of natural rubber said. However, this is better than the 3.6 per cent fall recorded last year.
Global production is expected to rise modestly from 8.821 million tonnes (mt) in 2009 to 9.367 mt in 2010. Most countries, including India, expect a moderate increase in production, while Malaysia alone expects production to grow faster by 16 per cent. Increased production is expected from growth in yielding area under rubber. Yielding area in India is expected to go up by 6,000 hectares, while China is expected to record a growth of 22,000 hectares, Vietnam (23,000 hectares) and Cambodia (10,000 hectares).
Labour shortage is not only becoming rampant in the growing regions of South India but is also extending to countries such as Malaysia. ANRPC reported that 85,000 hectares of mature rubber area which are lying untapped in Malaysia are now being tapped as prices have risen to all-time highs.
Although availability usually improves in April after the winter dormancy, the Association pointed out that it could be different this year. As prices have remained high, farmers have not been cutting down old trees and replanting with improved varieties in recent years and this is likely to affect the yield this year as well.
Limited options
Moreover, farmers have limited options of increasing yield as high prices had ensured that they extracted the maximum yield from their trees. Finally, consumers who have stayed away from the market in the past couple of months on account of high prices and low arrivals are likely to re-enter the market and prices could firm up further.
(thehindubusinessline.com)