Rubber Slumps to Five-Month Low as Europe Crisis Cuts Appeal

May 7 (Bloomberg) -- Rubber tumbled to the lowest price in almost five months, erasing this year’s gains, on concern that Europe’s debt crisis may slow the global economic recovery and weaken demand for the commodity used to make tires.


Futures in Tokyo fell as much as 7.2 percent to the lowest level since Dec. 16, extending declines from the 21-month high of 338.5 yen ($3,707 a metric ton) a kilogram reached on April 16. The contract has dropped 4.9 percent this year. The market also declined after the yen rose to a two-month high against the dollar, cutting the appeal of yen-based contracts.


Asian stocks plunged, following a rout in U.S. equities, on concern the European debt crisis will spread. The MSCI Asia Pacific Index slid 1.7 percent to 117.86 as of 3:55 p.m. in Singapore, and was set to close at the lowest level since Feb. 26. U.S. stocks tumbled the most in a year yesterday, while the euro dropped the most since credit markets collapsed in 2008.


“Europe’s debt crisis stoked concern that the global economic recovery may falter,” Shuji Sugata, research manager at Mitsubishi Corp. Futures Ltd. in Tokyo, said today by phone. “Investors are becoming increasingly cautious about buying industrial commodities.”


Rubber for October delivery, the most-active contract, fell as much as 20.1 yen to 259.5 yen per kilogram before settling at 262.6 yen on the Tokyo Commodity Exchange. The price has plunged 18 percent in the past five sessions and is set for the worst weekly performance since the five days ended Jan. 23, 2009.


Fiscal Crisis


“Fear of risk drove Tocom lower,” said Felix Yeo, a trading manager at the Singapore unit of Marubeni Corp. The crash in financial markets led to “massive cut-loss selling. This has definitely dampened investor sentiment,” he said.


Europe’s fiscal crisis could threaten banks in Portugal, Spain, Italy, Ireland and the U.K., Moody’s Investors Service said in a report published this week. Standard & Poor’s last month downgraded Greece’s debt to junk and followed with cuts to Portugal and Spain.


European Central Bank President Jean-Claude Trichet held interest rates at a record low of 1 percent yesterday and said the bank didn’t discuss whether to purchase government bonds to stem the region’s debt crisis, defying market speculation that he would take such measures.


Rubber also declined as supplies from Thailand, the world’s largest exporter, will increase after a low-production period, Sugata said. Latex production slows in February to April as growers reduce tapping, during a period known as wintering.


Slowing Growth


Supplies from three markets in southern Thailand totaled about 160 tons a day this week, compared with less than 50 tons a day during wintering, according to Chaiwat Muenmee, an analyst at DS Futures Co.


The free-on-board price of Thai RSS-3 grade rubber for June delivery, which excludes freight and insurance, fell 5.2 percent to 109.75 baht ($3.39) a kilogram today, according to the Rubber Institute of Thailand. The price climbed to a record 130.55 baht on April 28.


Rubber also dropped as China, the world’s largest consumer, moved to slow economic growth, Sugata said. The People’s Bank of China said on May 2 it will increase lender reserve requirements, the latest official effort to prevent the world’s fastest- growing economy from overheating.


September-delivery rubber on the Shanghai Futures Exchange fell 2.3 percent to settle at 22,140 yuan ($3,243) a ton. Earlier it dropped to 22,000 yuan, the lowest level since Feb. 9.


(bloomberg.com)




RUBBER-Tokyo futures hit 2010 low on euro debt crisis, oil
Posted: 07 May 2010 04:54 AM PDT
BANGKOK, May 7 - Tokyo rubber futures tumbled 7 percent to a five-month low on Friday as investors continued to unwind long positions, with lower oil prices adding to the downward pressure, dealers said.


* The benchmark rubber contract on the Tokyo Commodity Exchange <0#JRU:> for October delivery fell 17 yen to settle at 262.6 yen ($2.89) per kg. It touched 259.5 yen, the lowest since Dec. 16.


* "Concern over the euro debt crisis will stay in financial markets for a while and players will continue to sell as they don't want to take any risk," one dealer said.


* Oil fell below $77 a barrel on Friday in reaction to a growing sovereign debt crisis in Europe and bearish global growth prospects. [O/R]


* Dealers said they expected prices to fall further but higher demand in the physical market after a recent drop in prices should lend some support; 250 yen is seen as strong technical support. ($1=90.77 Yen)


(news.alibaba.com)




Cross-border rubber exports slow-
Posted: 07 May 2010 04:53 AM PDT
VietNamNet Bridge – Rubber exports along the China border have decreased since late April 2010. Chinese partners have reduced their purchase volumes unexpectedly, forcing prices down.


Dinh Van Tien, Head of the Import-Export Division of Vietnam Rubber Group, reported that the cross-border export price has dropped from over 70 million dong per ton to 63 million dong and are still falling.


China has taken action to cool the heated rubber market which was quite active in the first months of the year. On April 22, China marketed 30,000 tons of reserved rubber latex to force prices down.


“To date, 60,000 tons of rubber latex have been sold with the aim of reducing the “rubber latex fever” that Chinese enterprises were enduring,” the director of a rubber company explained.


Tran Thi Thuy Hoa, Secretary General of Vietnam Rubber Association, acknowledged that China’s decision is understandable. According to Hoa, the reserves will not be big enough to ease the demand in China. The hot development of the automobile industry means that China requires up to 2.75 million tons of rubber latex for 2010, but domestic production will provide only 500,000 tons.


“China will still have to import rubber latex, while Vietnam remains the top choice,” Hoa nodded, asserting that enterprises should not be too worried.


Still, businesses told the press that they have been facing many difficulties because their plans have been upended.


There are no exact figures on cross-border exports for the two last weeks of April and early May. However, a Vietnam Rubber Group official revealed that the number of successful transactions dropped to 1/3 of the previous level.


Nguyen Thanh Hai, Director of Dong Phu Rubber Company, noted that Chinese partners only pay 63-64 million dong per ton.


In early 2009, cross-border rubber exports also met difficulties, because Chinaset measures to control rubber imports, what they termed “flexible barriers.” For example, China would unexpectedly adjust the import-export volume, change the gates allowed to receive goods, or alter payment methods.


Usually, China applies new measures and Vietnamese goods get stuck at the border so that the prices go down.


(english.vietnamnet.vn)




Michelin sees raw material challenge in 2010
Posted: 07 May 2010 04:51 AM PDT
CLERMONT-FERRAND, France, May 7 (Reuters) - French tyre maker Michelin (MICP.PA) sees high raw material challenges as a challenge in 2010 and will hike its prices to reflect the increased costs, its managing partner said on Friday.


World rubber prices rose throughout 2009, and surged in the early months of 2010 because of a shortage of supply.


"We have to face up to ... a rise in raw materials, even if just recently they are starting to dip a little," said Jean-Dominique Senard, one of the group's three managing partners.


He was speaking at the company's annual shareholders' meeting in Clermont-Ferrand, central France, where it has its headquarters.


"But this violent increase is a challenge for the group; it's a real issue for 2010," he added.


"We are going to ensure that sale prices reflect this rise in costs we are experiencing, and we are going to do this with the dexterity necessary to avoid major disruption around the world," Senard said.


Michelin, which suffered a ten percent drop in sales last year when the auto crisis hit, said in February when it released full-year results that rising rubber prices and an unclear market outlook made it "extremely vigilant" for 2010. [ID:nLDE61B079]


Michelin, like Japanese competitor Bridgestone Corp (5108.T), is highly dependent on the evolution of natural rubber and oil prices.


Bridgestone on Friday hiked its profit forecast for the half-year to June on the back of brisk sales. [ID:nTOE64605Z]


Most tyremakers have suffered from the surge in rubber prices since the start of the year, prompted by tight supplies in major producing countries like Thailand and Malaysia, and a spike in demand.


Pirelli & C SpA (PECI.MI), one of Europe's biggest tyre producers, said in May it was considering raising tyre price further to offset raw material costs, including the cost of natural rubber. [ID:nLDE644220]


Tokyo rubber futures market, May JRUK0 gained more than between 25 and 40 percent in the first four months of 2010.


But futures tumbled 7 percent to a five-month low on Friday as investors continued to unwind long positions, with lower oil prices adding to the downward pressure. [ID:nSGE6460A9].


Michelin's first quarter sales released last month showed rising sales as the recovery gathered pace. The group confirmed its full year targets. [ID:nLDE63S1BC]


By 0859 GMT Michelin shares were up 0.67 percent at 52.55 euros against a CAC-40 index .FCHI down 2.3 percent.


(reuters.com)




Chinese Outbound Investment Accelerates…
Posted: 07 May 2010 04:47 AM PDT
Recently a Swiss expatriate living in the Stanley area of Hong Kong decided to sell his 600-square-foot flat. The response was immediate and enthusiastic, and the flat sold in a single day to a buyer from Mainland China who turned up the next morning to sign the papers – bearing a carpetbag entirely filled with HK$1,000 bills.


In much of the world, that would be an unheard-of transaction. But in Hong Kong over the last two to three years, it has become commonplace as a flood tide of money rolls out of China to the territory. An estimated 40 percent of all property purchases have been made by mainlanders, who have by and large limited themselves to high-end purchases. The amount of property purchases is hard to quantify, because a lot of it is a grey market made up of bureaucrats and mini-tycoons who don't want the Chinese government to know about it. Stories abound among real estate agents of Chinese housewives appearing in Kowloon to buy five flats at once. Nor are the stories limited to Hong Kong. InSingapore, Jakarta and other cities across Asean, Chinese buyers are appearing with huge amounts of cash, driving up property values as they go.


Although asset prices in Hong Kong and Singapore appear to finally be moderating with the rally in the US dollarand tightening by the People's Bank of China, one Chinese investor who specialises in flipping Hong Kong commercial property told Asia Sentinel that there is still a lot of money around to keep commercial property moving for awhile. Property investment is officially a relatively small part of total Chinese outward FDI but it tends to be the most visible to the street. It is unknown how much of it escapes the eyes of the government, which has yet to update outward FDI figures in the Statistical Bulletin since the end of 2008 so much of the information is anecdotal. The urge to invest in property, partly a strong Chinese cultural imperative, could also be explained by the problems they have had investing elsewhere in corporates. Chinese investors are quite cautious and are more likely to seek joint ventures, finding it difficult to complete and integrate foreign acquisitions successfully.


Total Chinese outward FDI in 2008 amounted to US$55.9 billion, an increase over 2007 of 111 percent (Figure 1 shows the lagging OECD data up to 2006). By contrast, US outward foreign direct investment was US$65 billion during the third quarter of 2009 alone, a decrease of 17 percent because of the global financial crisis.


Figure 1: Chinese Outward Investment Skyrockets, but From a Minuscule Base

Source: OECD


Both trade and investment in Asean are expected to pick up noticeably with signing of a free trade agreement with China on 1 January 2010. Sundram Pushpanathan, an Asean Deputy Secretary-General told the ASEAN Roundtable 2010 last week that ASEAN-China trade reached over US$192 billion last year, and is growing annually between 24 percent to 30 percent.


However, the Chinese have had some severe setbacks in the region, exemplified by the failure by Chinalco in its US$19.5 billion bid to acquire the Australian Rio Tinto mining giant. They are involved to their distress in the so-called North Rail Project to rebuild an 80-km railway in Central and Northern Luzon, 80 percent financed by the Chinese Ex-Im Bank. The project is mired in vast cost overruns, delays, political problems, the task of resettling 200,000 squatters and allegations of illegal provisions of the contract. Sources in Manila say the Chinese are growing seriously discouraged. Likewise, in 2007, the Philippines government was forced to cancel a US$330 million contract with China's Zhongxing Telecom Equipment, or ZTE, to wire the government for broadband after evidence emerged that President Gloria Arroyo's husband would be a major beneficiary. An announced project to clear 1 million acres of Kalimantan territory in Indonesian Borneo for palm oil simply seems to have disappeared.


The Chinese usually – although not always – center their official investment into fields that play into their own needs, usually by state-owned companies, most of it to fit their own voracious requirements for inputs such as coal, oil, timber and foodstuffs. From 2004 to 2008, investment in agriculture, forestry, fisheries and husbandry rose from US$288 million to US$1.718 billion. Foreign direct investment in mining went from US$1.8 billion to US$5.823 billion.


Disappointed by the failure of some agriculture operations in Africa, the Chinese have accelerated their investment considerably closer to home. The World Bank reported in 2009 that Chinese investment in Laos now exceeds Thai investment, amounting to US$3.58 billion. According to Vientiane newspapers, at least 119 companies were looking at mining prospects in the Bolaven Plateau region for potash, copper, iron and zinc. ZTE has been licensed to produce 50,000 hectares of cassava in southern Laos, which may rise to 100,000.


According to a paper prepared last year for Springer Science + Business Media and the International Society for Plant Pathology by researcher David Fullbrook, China's Yunnan State Farms has the right to develop 166,700 hectares of rubber across four southern Laotian provinces. As much as 200,000 hectares of rubber have already been planted by Chinese companies. The Chinese are said to be developing similar operations in Cambodia and Burma, although figures are not available. In Indonesia, according to Reuters, the world's largest coal producer, Sinopec, Sinosteel, Minmetals and the China Investment Corp. sovereign wealth fund are all said to be seeking LNG projects, oil blocks owned by foreign companies, and coal mines, with some potential deals reportedly worth as much as $1 billion.


After normalizing relations with Vietnam, China's invested capital reported in licenses went from US$120 million in 1999 to US$2,673 billion, an eight-fold increase in the number of projects and a 22-fold increase in registered capital. According to Associated Press, projects include several to the infrastructure of industrial zones in Haiphong and Tien Gang Province, a US$33 million steel project in Thai Binh Province, the Haiphong industrial zone by the Shen Viet Joint venture company, and others. These projects have contributed to change the outlook of Chinese investments in Vietnam in recent times, and not always for the better. A plan to develop a massive Central Highlands bauxite plant to produce alumina in Lam Dong and Dac Nong Provinces has spurred protests by environmentalists and raised popular concerns of nationalism over exploitation by China.


The Statistical Bulletin of China's Outward Foreign Direct Investment only goes up to the end of 2008, and the anecdotal evidence is that major outflows really began in 2009. However, Figure 2 is an indication that FDI flows into the Asean region have been rising steadily,


Figure 2: China Outward Investment, 2003-08


US$ mn200320042005200620072008
Asia1,5053,0004,3757,66316,59343,548
Hong Kong1,1492,6283,4206,93113,73238,640
Singapore(3)48201323981,551
Macao32278(43)47643
Indonesia2762125799174
Vietnam13172144111120
Thailand57235167645

Source: Statistical Bulletin of China


The Property Picture


"The main issue is language," said an independent property analyst. "That would make Hong Kong the first beneficiary, followed by Singapore and so on. But given the way relations between China and Taiwan are improving, I would expect Taiwan to see a flood of China capital inflow – as it is happening already."


Although there is a certain amount of opposition in Taipei, China and Taiwan are expected to sign an Economic Cooperation Framework Agreement in June that would allow for greater trade and investment between the two economies. Taiwan's house prices are expected to rise by as much as 15 percent over the next year and perhaps more, with the main impact in up-market residential, maybe hotels, and in commercial office space, as with Hong Kong. Over the past 12 to 18 months the mainland buying, particularly in Hong Kong, has gone to supporting prices, particularly in the premium market, and not allowing for downward adjustment. The pace has grown to the point where some old Chinese families in Indonesia, Singapore and other countries say they are becoming concerned that the influx of nouveaux riches from China will have a detrimental effect on their culture.


"In the case of Singapore and Hong Kong, there has been an increase in complaints from the sandwich (middle) class," the analyst said. "In Singapore, the government is attempting to allay fears and trying to push out more government housing and land supply for private developers." Concerned that a housing bubble was forming, the Singapore Monetary Authority ordered banks to increase down payments from 10 percent to 20 percent and introduced sellers' stamp duties on properties bought and sold within a year.


"In Hong Kong, they are thinking of bringing back the HOS again," the analyst said. The Home Ownership Scheme, discontinued in 2003, is designed to assist residents in buying subsidised public housing flats. However, as China continues to tighten and the US dollar continues to rise, Hong Kong's always-volatile property market may finally start to slow.


(asiasentinel.com)




Primary articles group inflation at 13.93%
Posted: 06 May 2010 03:52 PM PDT
The index for primary articles group rose by 0.4 % to 291.2 from 289.9 for the previous week. The annual rate of inflation, calculated on point-to-point basis, stood at 13.93 % for the week ended 24 April 2010 over 6.77 % during the corresponding week 25 April 2009.
The index for 'Food Articles' group declined by 0.1% to 292.3 from 292.7 for the previous week due to lower prices of fish-inland, fruits & vegetables, barley and wheat (1% each). However, the prices of tea (13%) and maize, gram and eggs (1% each) moved up. Annual wholesale food prices inflation rose 16.04% in the week ended 24 April, lower than 16.61% in the previous week.
The index for 'Non-Food Articles' group remained unchanged at its previous week's level of 257.5 (Provisional). However, the prices of mesta, caster seed and raw rubber (2% each) have increased whereas there was decline in prices of fodder (13%) and niger seed (2%).
The index for 'Minerals' group rose by 12.0% to 684.0 (Provisional) from 610.9 (Provisional) for the previous week due to higher prices of feldspar (17%), iron ore (15%), asbestos (11%) and steatite (8%). However, the prices of magnesite (22%) and barytes (12%) declined.
The index for fuel, power, light and lubricants group has remained unchanged at it's previous week's level of 365.1. The annual rate of inflation, calculated on point to point basis, has also remained unchanged at it's previous week's level of 12.69% and it was -5.54% during the corresponding week (ended 25 April 2009) of the previous year.
In a measure to increase the supply of wheat and rice, the agriculture minister Sharad Pawar has decided to release an additional 500,000 tonnes of wheat and rice every month for sale under the public distribution system, or PDS for the next six months. The move is aimed at restraining prices and curbing inflation.


(bloombergutv.com)




Tyre cos may increase prices by 25%
Posted: 06 May 2010 03:37 PM PDT
BANGALORE, INDIA (Commodity Online):Tyre manufacturers may hike product prices by up to 25 per cent to offset rising input costs. In March, Automotive Tyre Manufacturers’ Association (ATMA) had written to Prime Minister Manmohan Singh seeking government intervention to address the issue of rising rubber prices and its impact on the tyre industry. ATMA met the Prime Minister but has found no solution.


The tyre industry demanded that the government scrap the 20 per cent import duty on natural rubber and ban futures trading of the commodity, besides excluding natural rubber from negative lists under regional trade agreements.


The prices of new cars have increased. Tyre manufacturers have already increased products prices and more will follow unless steps are taken to soften rubber prices. ICRTMA Chairman Rummy Chhabra said cycle and rickshaw tyre makers will also be forced to hike prices by around 20 per cent if no change in the natural rubber situation happens.


“Around 300 large plantation growers in Kerala have formed a cartel and are selling natural rubber at over Rs 100 higher than the production costs. Cycle and rickshaw tyre makers are already facing negative margins and we may be forced to adopt price rise, which we have avoided all these months,” he said.


Cycle and rickshaw tyres comprise around 17 per cent of the estimated Rs 22,000 crore tyre industry in India. The All-India Rubber Industries Association (AIRIA) said many companies are facing a tough time due to the rising input costs. “Many of the small scale rubber users are on the verge of collapse due to the rising natural rubber prices,” AIRIA President T K Mukherjee said.


Commenting on the demand-supply scenario, ATMA Chairman Neeraj Kanwar said, “The country is going to face a shortfall of around 1.75 lakh tonnes of natural rubber this year, as production lags behind domestic consumption. Last fiscal it was around one lakh tonnes.


(commodityonline.com)






TOCOM rubber seen steady at 295.0 yen/kg at end-May
Posted: 06 May 2010 03:31 PM PDT
By Apornrath Phoonphongphiphat


BANGKOK, May 6 (Reuters) - Tokyo rubber futures are expected to end May at 295 yen per kg, close to the actual level at the end of April, and likely to consolidate around that number after slipping recently from a 21-month high, a Reuters poll showed.


Falls were likely to be limited despite the resumption of tapping in big producing countries because adverse weather has hampered output, dealers and analysts said.


The poll was carried out over several days because of holidays in Tokyo and Thailand, and responses came before the drop in TOCOM on Thursday.


The forecast of 295 yen for the benchmark six-month rubber contract on the Tokyo Commodity Exchange JRUc6, currently October 2010, compares with an actual 293.0 yen on April 30. It is 7 percent lower than the forecast of 317.5 yen per kg in a similar poll at the end of April. "I think TOCOM is in a consolidation phase after rising very fast in the past few weeks," said a trader in Thailand's Hat Yai rubber centre.


TOCOM rubber hit a 21-month high of 338.5 yen per kg in April when supply was tight for seasonal reasons and oil prices were firm, which makes synthetic rubber more expensive and tends to push up natural rubber.


However, after a three-day holiday in Tokyo, the benchmark fell more than 6 percent on Thursday as global markets worried about the fallout from the euro-zone debt crisis. "TOCOM rubber was always unlikely to stay at that high level for very long as the market factored in that the dry season was about to end and farmers have started tapping again," said a Singpore-based trader.


The TOCOM benchmark was forecast to drop a little further to 290.0 per kg by the end of June, the poll showed.


UNSEASONABLE DRYNESS


Traders in big producing countries say rubber prices should not fall sharply in the near term, with physical rubber staying above $3.50 per kg until early June as supply is unlikely to rise significantly even though farmers started tapping from late April.


Unfavourable weather has cut latex output, they said. Low moisture at the end of the dry season in late April made rubber trees produce less latex, so supply was not expected to get back to normal very quickly, traders said. "My understanding is that supply will stay tight in the physical market until late June," a Japanese dealer said. Physical rubber hit a record high of $4.10 per kg in mid-April and then held close to that level before dropping sharply on Thursday in line with TOCOM. Thai RSS3 was quoted at $3.50 per kg, down 12 percent from Friday. It was forecast to be at $3.60 per kg by the end of May. Malaysia SMR20 and Indonesia SIR20 could fall to $3.00 per kg from $3.38 and $3.26 respectively at the end of April.


(in.reuters.com)






Automakers afraid of a price rise
Posted: 06 May 2010 03:24 PM PDT
While the prices of commodities like steel, rubber, aluminium and plastic has reached high end limits for the automakers, still the companies are afraid of announcing a price hike in the Indian market due to the fact that the competition is also at its peak in the domestic circuit.


It may be noted here that steel a commodity that is used directly in a vehicle's body and indirectly through components comprises 50% of the total manufacturing costs and has seen a 25% price rise in one year.


However, the increasing competition in both the four-wheeler and the two-wheeler segment is keeping the companies away from announcing a hike in the Indian market. It is believed that aluminium prices have risen 20% over the past 12 months while natural rubber rates have leaped 150% in the same period have been bothering the bottom lines of the automakers in the country.


In fact, companies like Maruti Suzuki and Hero Honda have seen a shock at the start of new financial year as according to the analysts input costs could shave up to 200 basis points off the operating margins of automobile companies.


(topnews.in)




Summer time is rubber price hiking time
Posted: 06 May 2010 03:21 PM PDT
NASHVILLE, Tenn. -- Most commercial tire makers have announced price increases that take effect this spring and summer.


Bandag retread material is up 6 percent and Firestone and Dayton brand truck and bus radial tires will increase by the same amount, effective June 1.


Meanwhile, Hankook will also boost medium truck tire prices up 6 percent on June 1, while Continental will implement an upcharge of up to 7 percent for medium truck tires.


Michelin North America replacement truck tires sold in the U.S. are now 7 percent higher; its U.S. and Canada ag tire prices are also up by an average of 4.5 percent, Modern Tire Dealer reports.


As well, Goodyear Tire & Rubber's truck tires went up in price by 8 percent and tread rubber prices increased by 7 percent on May 1.


Earlier in March, Yokohama hiked prices on its light and medium commercial truck tires by up to 7 percent.


(todaystrucking.com)