Spot rubber up on tight supply

Spot rubber up on tight supply

Kochi, June 21

Select grades of rubber ended slightly higher on Monday on tight supply due to sellers holding back stocks hoping for further rise in prices, dealers said.

According to the Rubber Board, the benchmark RSS-4 grade inched up to Rs 170.50 a kg in Kottayam compared with the previous closing price of Rs 170.

In Kochi, the grade closed at Rs 170.25 a kg, it said. Firm trends in key Asian markets such as Tokyo may help the commodity to trade up on Tuesday, dealers said.

On NMCE, rubber futures were range-bound before ending with slight gains amid subdued demand, traders said. The active July contract, which hit an intra-day high of Rs 16,899 for 100 kg, settled at Rs 16,848 , up Rs 47, while the August settlement rose to Rs 16,350 compared with Rs 16,344 on Saturday.

In the Tokyo Commodity Exchange, rubber futures traded up on renewed demand during the day session as the benchmark November settlement rose to ¥282.6 a kg (Rs 141.58) from ¥274.4 while, the June contract inched up to ¥355.1 from ¥354 on Friday.

In Bangkok, RSS-3 grade, equivalent of the RSS-4 grade here, declined to Rs 166.72 a kg from Rs 168.64, according to the Rubber Board's data. In Kottayam, latex price largely declined to Rs 118.50 a kg from Rs 121 in the previous session. — © NewsWire18 Pvt. Ltd. 2010



Toyota, Honda Raise China Wages as Yuan's Flexibility to Threaten Profits
Posted: 20 Jun 2010 10:47 PM PDT
Toyota Motor Corp. and Honda Motor Co. suppliers sacrificed earnings in China by raising wages to end strikes, and the government’s decision to allow greater exchange-rate flexibility may slow plans to export vehicles from the nation if the move leads to an appreciation of the currency.

China’s central bank will allow the yuan more flexibility, it said in a statement on June 19, signaling an end to the currency’s two-year-old peg to the dollar.

The looser currency stance comes “on the back of all these moves to endorse the wage increases,” Jim O’Neill, Goldman Sachs Group Inc.’s chief global economist, said in a Bloomberg Television interview yesterday. “It’s all part of moving to the consumer, more domestic-demand-driven economy.”

Labor unrest that disrupted output at Toyota and Honda’s plants in China in the past month forced their suppliers in the country to increase wages. In addition to the higher labor costs, an appreciation of the yuan may hamper plans to export Chinese- made vehicles by carmakers including Honda, which operates an export-only factory in Guangzhou, Guangdong province.

“Honda probably has to have second thoughts on its export plant,” Koji Endo, managing director at Advanced Research Japan, said today in a Bloomberg Television interview.

Toyota, Japan’s biggest automaker, rose 2.3 percent as of the 11 a.m. midday break in Tokyo trading, while Honda, the second-largest, gained 3.5 percent. Nissan Motor Co., Japan’s third-largest carmaker, advanced 3 percent.

Chinese Export Goal

The Chinese government aims to boost exports of vehicles and parts to $85 billion by 2015 from at least $19 billion last year and the equivalent of 10 percent of the global auto trade by 2020.

Japanese carmakers won’t change plans to build vehicles in China for the domestic market, in part because of import duties, Endo said.

“China will continue to be the biggest car market in the world, and the growth rate will continue to be strong,” he said.

A stronger Chinese currency will help contain inflation, which may reduce worker wage demands, David Cohen, director for economic forecasting at Singapore-based Action Economics, said in a telephone interview yesterday.

Japanese carmakers and other foreign manufacturers including Taiwan’s Foxconn Technology Group, are spending more on labor as a result of recent unrest. Foxconn, which makes iPhones for Apple Inc., said it will double salaries for its lowest-paid workers after at least 10 Chinese employees killed themselves this year.

Toyota Supplier Strike

Toyoda Gosei Co., an affiliate of Toyota, ended a strike on June 19 that had disrupted car assembly, said Mieko Iwasaki, a Tokyo-based spokeswoman for Toyota. The company’s car plants in China are operating normally today, she said.

Akemi Ando, a spokeswoman for Honda, said the Tokyo-based company’s Chinese factories were also running as usual.

Iwasaki and Ando both declined to comment on the yuan decision’s impact on the companies.

Higher investment and improved wages in western China are deterring workers from migrating, pushing up pay in more industrialized regions like Guangdong in the south, said David Abrahamson, project manager at the China Center for Labor and Environment.

Minimum Wages

More than 20 Chinese provinces and cities raised minimum wages this year, the Shenzhen city government said on its website. In Shenzhen, which raised minimum wages an average of 15.8 percent, the government said higher pay will help companies recruit workers and will boost consumption.

Honda Lock (Guangdong) Co. ended a strike after employees at the Honda supplier agreed on June 18 to accept wage increases, said Takayuki Fujii, a Beijing-based spokesman for the carmaker. He declined to comment on the raise. Workers at the Zhongshan, Guangdong province, plant began their walkout on June 9 and suspended industrial action five days later as union leaders and management negotiated pay raises.

Honda ended the first strike at an affiliate on June 3 after agreeing to a 24 percent wage increase.

The fourth Honda affiliate to be hit by a walkout in the region, Nihon Plast Co., agreed to raise wages on June 19, Mutsuo Suzuki, a spokesman for the Shizuoka, Japan-based parts maker, said by phone today.

Nihon Plast

The pay increase was smaller than workers had demanded, Suzuki said, declining to specify further. The plant lost a day and a half of production before resuming output late on June 18, he said.

Nihon Plast is 21 percent owned by Honda, according to data compiled by Bloomberg. The company also supplies parts to Nissan and Suzuki Motor Corp., according to its website.

The Zhongshan factory, a joint venture between Nihon Plast and Osaka, Japan-based Itochu Corp., makes steering wheels for all models produced at Nissan’s Chinese venture, Dongfeng Nissan Passenger Vehicle Co. Mitsuru Yonekawa, a spokesman at Nissan, said the Yokohama-based company’s car production in China wasn’t affected by the Nihon Plast strike.

Workers at another Toyota supplier in China, Tianjin Star Light Rubber and Plastic Co., also walked out briefly on June 15. The issue was resolved when the company offered a pay increase.

Chongqing Brewery Co.’s operations returned to normal on the evening of June 18 after workers ended a strike, the Shanghai Securities News reported today, citing an unidentified company official.

(bloomberg.com)





Rubber Advances as China's Signal on 2-Year Yuan Peg May Boost Imports
Posted: 20 Jun 2010 10:45 PM PDT
Rubber climbed for the first day in three after China signaled it will unshackle the yuan’s fixed rate to the dollar, stoking speculation the world’s largest consumer may boost imports of the commodity.

Futures in Tokyo climbed as much as 2.2 percent, extending last week’s 3.6 percent increase. The price reached a two-week high of 286.7 yen on June 16 amid optimism that Europe’s sovereign-debt crisis may not stall global recovery.

The People’s Bank of China said on June 19 it may allow the yuan to move higher, making imports more affordable to buyers in the world’s third-largest economy. Asian shares and commodities surged while the dollar weakened against major counterparts as China’s move boosted investor confidence.

“A stronger yuan would encourage Chinese tire makers to increase rubber purchases from overseas to cut costs,” Takaki Shigemoto, an analyst at research and investment company JSC Corp. in Tokyo, said today by phone.

November-delivery rubber gained as much as 6 yen to 280.4 yen per kilogram ($3,090 a metric ton) before trading at 280.2 yen on the Tokyo Commodity Exchange at 12:42 p.m.

November-delivery rubber on the Shanghai Futures Exchange added 2.3 percent to 21,695 yuan ($3,184) a ton. Earlier, the price increased to 21,735 yuan, the highest level since June 17.

China, the world’s largest auto market, is also the biggest user of natural rubber. The nation may boost gross imports of the raw material to 1.68 million tons this year from 1.59 million in 2009, according to the May report from the Association of Natural Rubber Producing Countries.

Natural Rubber

China’s production of natural rubber may grow to 680,000 tons this year from 645,800 tons in 2009, the report said.

China’s central bank indicated it’s abandoning the 6.83 yuan peg to the dollar adopted during the global financial crisis to shield exporters. American lawmakers had argued that the yuan peg was an unfair subsidy for China’s exporters. A stronger yuan may allow policy makers the ability to stanch inflation without curbing economic growth.

“It’s a vote of confidence in Asia and in risk appetite and a reduction in the dangers of a trade war,” said Sean Callow, a currency strategist at Westpac Banking Corp. in Sydney.

Global rubber output may total 9.7 million to 10.2 million tons this year as drought and heavy rainfall in key producing countries including Thailand and Indonesia damage supply, Stephen Evans, the secretary-general of the International Rubber Study Group, said in an interview last week. That compares with the group’s forecast range of 10.1 million to 10.6 million tons on March 17.

Demand will probably increase by 4.4 percent this year to 9.8 million tons, based on the assumption that the economic recovery will slow, Evans said. The group forecast 10.2 million tons in March.

(bloomberg.com)





Rubber shows its elasticity as market prices bounce about
Posted: 20 Jun 2010 10:44 PM PDT
Every day thousands of new cars hit the roads in China and they all travel on rubber tires. The four wheels on your car, or the 14 wheels on the trucks hurtling between Beijing and Shandong and beyond are the most obvious evidence of the importance of the rubber industry.

This increasing demand is distorting rubber pricing in the same way that other commodity prices are also distorted. The price behavior moves beyond the simple relationship between supply and demand and is influenced by derivative price behavior.

The basics of this market are simple economics. Rubber is extracted from trees using methods, which have not changed significantly in the last 100 years.

It's labor intensive and suitable for small farmers and larger plantations. When demand is high there is a push to increase the cultivation area for rubber.

This supply lags demand because it takes around 7 years before a rubber tree starts to produce rubber but the tree continues production for around 25 years.

The alternative to natural rubber is synthetic rubber, which is a by-product of the oil industry. When oil prices are high the demand for cheaper natural rubber increases.

When oil prices are low synthetic rubber becomes cheaper and the demand for natural rubber falls. Traditionally the analysis of future rubber price movements has been closely tied to the future price of oil.

At the recent ASEAN Rubber Conference in Malaysia I examined the three features that dominate the rubber 2010 outlook. The first feature is market and trend volatility and trend divergence. The second is currency volatility.

The third is the recent confirmation of a head and shoulders pattern in the Japanese Tokyo Commodity Exchange rubber market. This pattern is a very reliable indication of significant downtrend pressure. The first two features affect many commodity prices.

Combined, they have a substantial impact on the price objectives for rubber. They also have a very large impact on the stability and continuity of the trend. Trend instability is a feature of global financial and commodity markets after the global financial crisis.

The first feature is the divergence in price trend behavior between oil and rubber. The rubber price has continued to move strongly upwards at a time when the oil price remained relatively stable.

This is an unsustainable bubble and it leads to longer term price corrections in the rubber price as the normal oil and rubber price relationship is re-established.

This bubble is influenced by the second feature, the currency volatility in the dollar index. In the past year the behavior of the rubber price closely follows the behavior of the dollar index.

This is a new behavioral relationship. The recent trend in the dollar index is defined with a parabolic curve, which suggests a significant correction will develop. This dollar index volatility transfers to the rubber pricing. The third feature is the recent confirmation of the strong head and shoulder pattern in the Japanese rubber market. This supports the bubble analysis derived from the first two features.

The head and shoulder pattern is not as strong in the Shanghai Rubber Futures market but it gives a downside target near 19,200 yuan. The pattern is invalidated with a move above 24,500 yuan.

Commodity pricing behavior is no longer a simple matter of seasonal supply and demand. Commodity investment funds have moved into this area. They are using a variety of financial methods and derivatives to 'invest' in commodities by using futures on a long-term basis.

The development of commodity funds that use exchanged traded notes based on holding futures positions for long-term investment has an impact on the market.

This reduces the efficiency of the commodity futures markets by reducing day-to-day liquidity.

This lack of liquidity helps to create price bubbles that are not related to underlying demand and supply of the commodity.

These pricing anomalies are further exaggerated by currency volatility. Commodity traders need to develop currency-hedging skills to manage the new commodity trend instability.

The author is a well-known international financial technical analysis expert.

(english.peopledaily.com.cn)





Spot rubber rules steady
Posted: 20 Jun 2010 10:42 PM PDT
Spot rubber prices closed steady consecutively for the third day on Saturday (19 June 2010). The weekend session was comparatively inactive as the prices remained neutral lacking quantity buyers and sellers to set the trend. Sheet rubber closed flat at Rs 169 a kg though the domestic rubber futures were slightly better on the National Multi Commodity Exchange (NMCE).

The July futures for RSS 4 rose to Rs 168.01 (167.64), August to Rs 163.44 (162.71), September to Rs 158.93 (158.50) and October to Rs 157.90 (156.60) a kg on the National Multi Commodity Exchange.

Spot rates were (Rs/kg): RSS-4: 169.50 (169.50); RSS-5: 167 (167); ungraded: 165 (165); ISNR 20: 151.50 (150.50) and latex 60 per cent: 120 (120).

(indiainfoline.com)





Malaysia's NR Production in April Up 8.9%
Posted: 20 Jun 2010 10:40 PM PDT
Malaysia, the world's third-largest natural rubber producer after Thailand and Indonesia, produced 54,530 metric tonnes of natural rubber in April or up 8.9% on year, according to the latest figures released by the Malaysian Department of Statistics.

Output, however, was down 22% from March due to fewer trees being tapped because smallholders wanted to keep labour cost in check. March output was at 70,318 tonnes.

Malaysia’s rubber stocks at the end of April rose 36% on year to 138,511 tonnes. Rubber imports were down 4% to 49,342 tonnes while exports were up 50% to 68,452 tons. Latex concentrate, the main material in the glove industry, and standard rubber made up 52% and 28% of imports, respectively.

Dometis rubber consumption rose 0.7% on year to 37,603 tons, of which around 68% was in the glove industry.

(irco.biz)