Spot rubber flares up to Rs 204/kg

Spot rubber flares up to Rs 204/kg


Kottayam, Nov. 6

Physical rubber prices flared up sharply on Saturday. The weekend session was extremely bullish following the gains in futures while widespread rains and short supplies continued to haunt the market mood. A firm closing in the international markets on Friday instilled hopes for an even higher opening on Monday.

Sheet rubber increased to Rs 204 (200) a kg after hitting an intraday high of Rs 205 a kg during closing hours.

Futures improve

In futures, the November series improved to Rs 207.74 (204.41), December to Rs 209.96 (206.89), January to Rs 211.42 (209.06) and February to Rs 213.28 (211.27) a kg for RSS 4 on the National Multi Commodity Exchange.

Spot rates were (Rs/kg): RSS-4: 204 (200); RSS-5: 196 (191.50); ungraded: 192 (188.50); ISNR 20: 198 (196) and latex 60 per cent: 130 (130).



Rubber in Tokyo Sets 30-Year High as Supply Lags Growing Demand
Posted: 05 Nov 2010 10:07 AM PDT
Nov. 5 (Bloomberg) -- Rubber in Tokyo surged to a 30-year high and futures in Shanghai advanced to a record, on concern that supply may fall short of rising demand from tire makers as rain and flooding in Asian nations disrupted production.

The April-delivery contract on the Tokyo Commodity Exchange jumped as much as 5.7 percent to 364.8 yen per kilogram ($4,515 a metric ton), the highest level since February 1980, before settling at 361.7 yen. The contract has climbed 11 percent this week, the best performance since the week ended in Dec. 19, 2008.

Cyclones and monsoon rains have swamped parts of Southeast Asia in the past month, killing hundreds of people in Thailand, Vietnam and Malaysia and damaging agricultural land. Industrywide light-vehicle sales in the U.S. gained to a 12.3 million annual rate in October, the fastest pace in more than a year, according to Autodata Corp.

“Producers have difficulty catching up to rising demand as rain and floods in Thailand and other Asian countries curbed latex output,” Takaki Shigemoto, an analyst at JSC Corp in Tokyo, said today by phone. “Rubber is likely to extend a rally as car sales will keep expanding globally.”

May-delivery rubber on the Shanghai Futures Exchange jumped by the daily price limit to a record 35,025 yuan ($5,258) a ton. The price has gained 43 percent this year.

Car Sales

Hyundai Motor Co., Honda Motor Co. and Nissan Motor Co. led U.S. sales gains for Asian carmakers as higher retail demand made October the best month since the U.S. government’s “cash for clunkers” incentive program lifted the pace to 14.2 million in August 2009, according to New Jersey-based Autodata.

Nissan, Japan’s third-largest automaker, raised its profit and global unit-sales forecasts yesterday after boosting net income by almost four times in the last quarter. The company increased its full-year vehicle sales target to 4.1 million units from an earlier target of 3.8 million.

Another Japanese carmaker, Fuji Heavy Industries Ltd., forecast this week that sales would climb to a record in China this year aided by its Legacy model. China offered 4 billion yuan of auto replacement subsidies in the first 10 months, boosting new car sales by 32.6 billion yuan, the Ministry of Commerce said in a statement posted on its website yesterday.

Rubber supply was curbed as 11 provinces in Thailand’s south, a major plantation area, have been inundated since Nov. 1, bringing the total affected area to 50 provinces, according to Thailand’s Department of Disaster Prevention and Mitigation. Floods and blackouts forced the cash-rubber center in Thailand’s Songkhla province to close since Nov. 2, according to the Rubber Research Institute of Thailand.

Heavy Rain

Rubber in Indonesia, the second-largest producer and exporter, climbed to a record yesterday after heavy rain and floods hurt supplies, according to an industry association.

“The price rose to a record after heavy rains and floods hit Thailand, Malaysia and Sumatra,” Asril Sutan Amir, chairman of the Rubber Association of Indonesia, said in a phone interview yesterday. Thailand, Indonesia and Malaysia represent a combined 70 percent of global rubber output.

Production this year will probably drop 5 percent, Amir said. The association earlier forecast output this year of about 2.4 million tons.

(bloomberg.com)





China Halts Sinograin's Trading Business, Seeks Fines for Excessive Buying
Posted: 05 Nov 2010 10:03 AM PDT
The China Grain Reserves Corp. has been ordered to halt its trading business and companies that buy grain in excess of government limits will be fined, the State Administration of Grain said.

State-run Sinograin, as China Grain Reserves Corp. is known, should only engage in “stockpiling and rotating government reserves,” the agency said in a statement on its wesbite. The move is aimed at ensuring an orderly grain market and managing inflationary expectations, the statement said.

The measure to stabilize the market comes after grains, rubber, cotton and sugar prices in China gained to records this week as tight supplies stoked their investment appeal. Inflation gaining at the fastest pace in 23 months and increased liquidity after government curbs on property investments have fueled the rally in commodity prices.

“The move is to reduce the number of entities in the grains market,” Tian Feng, analyst at BOC International (China) Ltd. “The government doesn’t want those companies that receive subsidies to stockpile grains for the government to have their own sideline business at the same time.”

Sinograin handles stockpiling grains and oilseeds for the government as well as operating its own grain processing and trading business, according to the company website.

Qualified grain buyers will have to be registered properly and conduct their grain purchasing business within their stipulated areas, said the government statement, which was dated Nov. 4. Granaries may receive fines of as much as five times the value of the grain that exceeds the limit and risk having their business licenses revoked, the statement said.

“We will enforce a broad examination of all entities in the grain market,” the agency said. The examination will weed out those unqualified buyers from purchasing grains, it said.

(bloomberg.com)





Shanghai Exchange to Curb `Abnormal' Trading After Prices Surge to Records
Posted: 05 Nov 2010 10:02 AM PDT
China’s Shanghai Futures Exchange issued rules today to prevent “abnormal” trading following a similar move by the Zhengzhou bourse to curb speculation as commodity prices trade at record levels.

The exchange will alert the securities regulator if investors are found trading between their own accounts or frequently placing and canceling orders, which can mislead the market, it said in a statement on its website today. Investors should also not use related accounts to hold positions that exceed limits for individual investors, the bourse said.

Domestic prices of rubber, cotton and sugar climbed to records today on speculative buying and supply shortages. China’s consumer price index rose to a 23-month high in October, spurring the state reserves regulator to sell sugar, cotton, corn, aluminum, and zinc to cool prices.

“This is clearly aimed at curbing excessive speculation,” Lin Hui, deputy director of the research department at the Orient Securities Futures Co.

The Shanghai Futures Exchange, where copper, aluminum, zinc, natural rubber, steel, and fuel oil futures are traded, said it will take measures ranging from verbal warnings to submitting cases to the China Securities Regulatory Commission to probe any “abnormal trading”.

“Speculative money has been flowing into commodities, partly because of strong inflation expectations,” said Axl Wang, an analyst at Wanda Futures on Oct. 29.

Copper for February delivery on the Shanghai Futures Exchange gained 4.2 percent to close at 67,390 yuan ($10,120).

(bloomberg.com)





Tires get more expensive as rubber prices rise
Posted: 05 Nov 2010 10:01 AM PDT
CLEVELAND, Ohio -- Tire prices are going up, and they should continue to rise next year as tire makers deal with skyrocketing prices for rubber.
"People who haven't purchased tires in the past 18 months are going to be unpleasantly surprised if they go to replace at the end of the year," said John Turk, chief executive officer at Conrad's Tire Express and Total Car Care.
Earlier this week, Bridgestone raised its tire prices by 8 percent. Findlay, Ohio-based Cooper Tire & Rubber Co. raised its prices 6.5 percent. Several other major manufacturers have gone through two price increases this year with more expected to come.
Rubber is the prime culprit. At the end of 2008, rubber cost tire makers 57 cents per pound. In April, a pound or rubber cost $1.79. Prices have dipped slightly since then, but they remain at 15-year highs.
The drastic increase has caused huge financial headaches for tire companies. Goodyear Tire & Rubber Co. spokesman Keith Price said rubber accounts for about 25 percent of what Goodyear spends on raw materials. Petroleum-based synthetic rubber makes up another 25 percent.
That rapid increase in rubber prices led Goodyear to report a $20 million loss in its third quarter last week. The company said it expects to continue struggling with rubber prices through the rest of this year.
During Goodyear's earnings conference call, Chairman and Chief Executive Richard Kramer blamed market speculation on the big rubber price increase. He said rumors of bad crops, coupled with expectations of economic growth led some investors to bet on rubber shortages. He said those bidders pushed rubber prices higher.

"We believe speculation has taken prices well above levels that make any sense to us," Kramer said during the call.
While the tripling of rubber prices in less than two years is dramatic, it does fit into long-term patterns for that industry.
Over the past decade, rubber prices have averaged a 16 percent growth rate each year. Since 2005, that rate has been more than 19 percent.
Tim Denoyer, an analyst with New York research company Wolfe Trahan, said tire makers have responded by raising prices, but those increases haven't come close to making up the difference.
The average tire price has only gone up by about 2 percent a year, data from the U.S. Bureau of Labor Statistics show.
"It's a big, long-term problem. It's not just weather in Thailand," Denoyer said.
Rubber prices started moving up sharply toward the end of 2004 as auto sales in China and other developing markets lead to increased demand for rubber.
Rubber companies responded by planting more trees, but it takes seven years for a tree to grow large enough to produce rubber sap.
"There was a real lack of investment until 2005," Denoyer said.
Trees planted that year will start producing rubber in 2012, but it's not clear that the increased supply will lower prices. Analysts expect global demand for cars and tires to grow rapidly while those trees grow.
Goodyear and other tire companies are investing in new technologies that could replace natural rubber with synthetic rubber derived from other plants. But those products are years away from providing the material needed to make tires. Denoyer said he doesn't expect raw materials costs for tire makers to drop significantly until they can master such technologies.
Turk said he doesn't see any end in sight to the regular price increases the tire makers have been charging him and other retailers.
"Commodity prices are going to keep going up," Turk said.
(cleveland.com)