Rubber Futures Advance for Second Day on Tight Supply, U.S. Economic Data

Rubber Futures Advance for Second Day on Tight Supply, U.S. Economic Data
Posted: 19 Nov 2010 03:43 AM PST
Rubber climbed for a second day as U.S. jobless claims and manufacturing data boosted optimism that the economic recovery is gathering pace amid tight supply from major producers in Southeast Asia.

April-delivery rubber on the Tokyo Commodity Exchange surged as much as 3.8 percent to 375.9 yen per kilogram ($4,502 a metric ton) before settling at 367.7 yen. The most-active contract has gained 2.1 percent this week and climbed 33 percent this year as heavy rain in Thailand, Indonesia and Malaysia, the top three growers, has disrupted tapping and lowered production.

“Worries over the Irish debt problem have eased and U.S. economic data are supportive, raising optimism demand for the commodity will continue to grow,” Varut Rungkhum, analyst at commodity broker Agro Wealth Ltd., said by phone from Bangkok.

Ireland will probably seek a bailout from the European Union and International Monetary Fund worth “tens of billions” of euros to rescue its battered banks, central bank Governor Patrick Honohan told Irish state broadcaster RTE yesterday. Fewer workers than forecast filed for U.S. jobless benefits, while Philadelphia-area manufacturing topped estimates.

May-delivery rubber on the Shanghai Futures Exchange gained by the daily 5 percent limit to 34,415 yuan ($5,185) a ton and closed at that level. The contract has lost 3.8 percent this week, down from a record 38,920 yuan reached on Nov. 11, amid concern that China may take additional steps to curb inflation.

Tight Supply

“Supply remains tight,” Gu Jiong, an analyst at commodity broker Yutaka Shoji Co., said by phone from Tokyo. Rubber was also supported by rallies in other commodities and a weakening Japanese currency, he added.

The cash price in Thailand climbed to a record 132.25 baht ($4.42) per kilogram today as heavy rain and floods in the country’s south damaged trees, tightening supply, according to the Rubber Research Institute of Thailand.

Natural-rubber output in Thailand may decline by 10 percent to 870,000 tons in the fourth quarter, reducing total output this year by 5 percent to 3 million tons, according to an estimate by the Thai Rubber Association.

Applications for unemployment insurance payments rose by 2,000 to 439,000 in the week ended Nov. 13, Labor Department figures showed. Claims were projected to rise to 441,000, according to the median economist estimate in a Bloomberg survey. The total number of people collecting unemployment insurance dropped to the lowest level in two years, while those receiving extended payments climbed.

Manufacturing in the Philadelphia region expanded in November to the highest level this year. The Fed Bank of Philadelphia’s general economic index rose to 22.5 from 1 a month earlier. Readings greater than zero signal expansion. The gauge was forecast to increase to 5, according to the median estimate in a Bloomberg News survey.

(Source: http://www.bloomberg.com/news/2010-11-19/rubber-futures-advance-for-second-day-on-tight-supply-u-s-economic-data.html)






Rubber rallies 3.7 pct on supply concerns
Posted: 19 Nov 2010 03:41 AM PST
Rubber futures rallied on Tokyo Commodity Exchange (TOCOM) on Friday, on expectations Chinamay top off its stocks and on continued supply concerns.

Better-than-expected US data released overnight also helped improve the sentiment for commodities, traders said.

As of 10:30 GMT, the most traded April 2011 contract was at 371.1 yen ($4.45) per kilogram, up 2.7 percent on the day, and 3.3 percent higher from last week's close.

Supplies from Thailand, the world's largest producer of natural rubber, are also reduced by heavy rains and floods affecting the major yielding areas of the country.

Spot price of ribbed smoked sheet (RSS) -3 grade rubber rose by 1.17 baht to 124.30 baht ($4.14) inThailand's Songkhla market on Friday.

Production in India is also severely hit by bad weather in Kerala, a southern state of the country which contributes more than 90 percent of India's total output. India is no.4 producer of the commodity in the world.

US jobless claims rose by 2,000 to 439,000 in the week ended Nov. 13, less than market consensus of 441,000, Labor Department figures showed. The total number of people collecting unemployment insurance dropped to the lowest level in two years, while those receiving extended payments climbed.

Manufacturing in the Philadelphia region expanded in November to the highest level this year. The Fed Bank of Philadelphia's general economic index rose to 22.5 from October, sharply higher than market forecast of 5. Readings above zero signal expansion.

(Source: http://www.ibtimes.com/articles/83785/20101119/rubber-tocom-tokyo-futures-april-contract-thailand-india-kerala-us-data-philadelphia-jobless-claims.htm)






Synthetic rubber use up 26.6% in April-July
Posted: 19 Nov 2010 03:37 AM PST
Reasons: High natural rubber prices, low stock.

The steep rise in natural rubber (NR) prices has resulted in a sharp increase in the consumption of synthetic rubber (SR) in the country. The consumption of SR was up 26.6 per cent during April-July period of the current fiscal year, compared to 4.9 per cent growth in the same period of 2009-10, latest data by the Rubber Board showed.In volume terms, total SR consumption increased to 132,925 tonnes in April-July as against 104,955 tonnes in the same period of the last financial year.

There has been a deviation in the consumption pattern of rubber-based industries in India, especially by tyre manufacturers. A 32.6 per cent increase was recorded in the consumption of SR by tyre companies during the period at 93,503 tonnes against 70,513 tonnes in the same period last year. Though the consumption of NR by tyre producers during the period increased only 5.1 per cent.

With NR prices almost doubling in the last 15 months and poor stock position led to a supply crunch which forced the industry to depend on SR.

More SR was routed to India through imports as domestic production was only 27 per cent of the total requirement. The price advantage of imported SR compared to NR also caused the increase in its consumption.

Certain segments of tyres like car radials especially meant for export purpose need more SR which is preferable in the overseas markets, according to experts. Traditionally Western countries use SR mainly for production of tyres while Asian countries largely use NR.

The consumption ratio of NR and SR in India was 76:24 few years back, which is now 74:26 in favour of SR. There was an improvement in the domestic production of SR. In April-July period, production increased 2.2 per cent while there was negative growth of 4.4 per cent in the same period of the last financial year. Total SR production increased to 35,144 tonnes as against 34,392 tonnes in April -July of 2009-10.

(Source: http://www.business-standard.com/india/news/synthetic-rubber-use266-in-april-july/415365/)






China tightening to weigh on commodities
Posted: 19 Nov 2010 03:32 AM PST
(Reuters) - Steps to curb inflation in China could further dampen a sharp rally in commodity prices this year.

Speculation that a rate move could be just around the corner grew after an official Chinese newspaper suggested that Friday could be a convenient time to raise rates before banks settle accumulated interest on the 20th day of the month, and Chinese Premier Wen Jiabao emphasized that his government is preparing steps to tame price rises.

With inflation running at a 25-month high, raising interest rates or taking measures to cap domestic prices could constrain commodity demand or drain liquidity from markets.

The following scenarios look at what might happen and the potential impact on China's commodity markets.

CHINA RAISES INTEREST RATES AGAIN

The People's Bank of China (PBOC) surprised the world with its October interest rate hike, the first since December 2007. But it did not close the gap between interest rates and inflation and it did not stop a rally in China's commodity futures markets.

Most investors are now asking "when" rather than "whether" interest rates will rise again.

But China runs a risk if it presses the trigger too soon: so far, China has front-loaded its monetary tightening, striking before the market expected it to do so.

Having played one ace, the PBOC may be wary of using another before it needs to, in case speculators flock back to the market, sensing a lull.

Beneath the froth of liquidity, China's fundamental demand for most commodities is expected to stay strong, which would help support underlying prices.

"The government realises they have massive demand that will keep prices under tension. There must be a heightened level of concern after CPI data," ANZ's senior commodity analyst, Mark Pervan, said.

The government has said it aims to increase supplies of commodities and to crack down on hoarding, sending a message that it aims to prevent speculators from exploiting the situation.

Under a tightening scenario, analysts expect markets like rubber and zinc, which have seen significant inflows of speculative money, to fall hard, while markets like copper, which have a more solid fundamentals underpinning them, may hold up better.

Foodstuffs are likely to be hardest hit, highlighting Beijing's focus on consumer inflation.

In recent months, analysts have blamed excess liquidity for pushing up commodity prices across the board, but especially cotton , sugar and rubber .

Rising prices for agricultural commodities such as soybeans , corn and wheat have also prompted farmers to hold onto their crops after the harvest, restricting supply and giving prices another upward push.

The feed-through into food prices, which make up one third the inflation basket, and the risk of civil unrest is likely to be a much bigger concern for policy makers than the danger of boom and bust caused by speculative funds in the market.

CHINA RAISES RRR AGAIN

The PBOC has already tightened banks' balance sheets four times this year by raising their required reserve ratios (RRR). This makes it harder for them to lend but doesn't touch other sources of money supply, such as the revenues from China's trade surplus or the savings that ordinary citizens have squirreled away.

The increases in reserve ratios have had little impact on commodity prices this year after the initial shiver following each tightening move. Many investors have chosen to see such measures as shoring up economic stability rather than worrying about the short-term fall in liquidity and the potential impact on demand.

But even if raising reserve rations has had little impact on commodity prrices, it sends a signal to the market that the government is intent on draining excess liquidity whenever possible.

CHINA DOES NO MORE TIGHTENING BUT KEEPS THE FEAR ALIVE

China's central bank may not need to actually tighten monetary policy. Just talk of a rate rise may be enough to chase off speculators -- for now.

The PBOC has already flipped most economists' forecasts. Before its latest hike on Oct 19, most economists were not expecting any movement on interest rates until 2011. Now many expect another move to come before the end of 2010.

Having created that buzz, the PBOC might even decide to keep its powder dry. Just talk of an impending interest rate rise sent commodity futures tumbling to their daily limits on Nov 12.

Although the rumour proved unfounded, many futures contracts have fallen since then, making it a bigger success in turning around the market than the actual interest rate rise on Oct 19, which barely put a dent in many commodity prices before they continued their upward march.

In the longer term, chasing speculative money out of the agricultural commodity markets could also help bring down food prices, but it risks attracting complaints about the freedom of China's financial markets, a sensitive topic for the government.

(Additional reporting by Nick Trevethan in Singapore)



Spot rubber improves on global cues


Kottayam, Nov. 19

Physical rubber prices flared up on Friday. The market appeared to be bullish following the smart gains in the domestic and international futures. There were no quantity sellers even during the closing hours possibly on supply concerns.

Rubber production in Thailand will fall by about 30,000 tonnes a year for the next six years because of damage from floods, according to official circles. About 16,000 hectares of rubber trees have been destroyed in recent floods and landslides though it represented only about 0.5 per cent of Thailand's rubber area.

According to traders, sheet rubber bounced back to Rs 200 (196) a kg on fresh buying and short-covering.

Futures gain

The December futures for RSS 4 improved to Rs 203.12 (202.02), January to Rs 205.96 (204.86), February to Rs 208.35 (207.84) and March series to Rs 211.69 (210.97) a kg on the National Multi Commodity Exchange. The November futures for RSS-3 moved up to ¥365.5 (Rs 198.86) from ¥358 during the day session and then to ¥373.6 (Rs 203.25) a kg in the night session on the Tokyo Commodity Exchange (TOCOM). Spot rates were (Rs/kg): RSS-4: 200 (196); RSS-5: 188 (185.50); ungraded: 184 (180); ISNR 20: 194 (192) and latex 60 per cent: 130 (130).