Oil prices drive demand for natural rubber

Oil prices drive demand for natural rubber
MONDAY, APRIL 4, 2011

LOCAL rubber producers could reap a windfall from higher international prices, the Myanmar Rubber Planters and Producers Association says.
U Khaing Myint, the association’s secretary general, said international prices have nearly doubled since the end of December, rising from US$3000 a tonnes to $5600 on March 29.
Recent increases in the crude oil price, which has nearly hit $107 a barrel – the highest price since September 2008 – have driven international rubber prices upward, although the March 11 earthquake and tsunami in Japan had briefly pushed prices as low as $2000 a tonne.
“Rubber prices have been rising strangely this year. With crude oil prices rising quickly I think synthetic rubber is less attractive commercially, which should increased demand for natural rubber,” he added.
A Ministry of Commerce official said: “The demand for naturally produced rubber always strengthens when the crude oil price rises because it becomes more economical.”
He said the number of trees planted and the amount of rubber harvested are gradually expanding. In the 2010-11 fiscal year, which ended March 31, about 1.2 million acres of rubber trees had been planted, with about 120,000 tonnes of latex extracted from about 400,000 acres. Nearly 100,000 tonnes of rubber, earning $132 million, had been exported by early March, U Khaing Myint said.
By comparison, less than 100,000 tonnes of rubber was extracted in the previous financial year.
U Khaing Myint said about 90 percent of all the rubber produced locally is exported, with about 70pc sold to China and the rest shipped to Malaysia, Indonesia, Singapore, Vietnam, South Korea and India.
There are rubber plantations in Kachin, Kayin, Chin, Mon, Rakhine and Shan states and Tanintharyi, Bago and Ayeyarwady regions, with Mon State and Tanintharyi Region the major producers.
U Khaing Myint said the majority of rubber producers are small enterprises and cannot produce high-quality stock, so they earn lower prices.
U Khaing Myint said a recently released study produced by the International Rubber Study Group predicts that by 2013 the world’s rubber consumption is expected to rise to 19.5 million tonnes of naturally produced rubber.




Natural Rubber price surges on strong fundamentals
MONDAY, APRIL 4, 2011

AHMEDABAD (Commodity Online): Rubber prices are in uptrend and rising from last several weeks. Last week rubber opened at 22900 and made high of 23975 this week it crossed last week’s high and currently trading near 24520 and looks strong for coming days.
Increase in oil prices has lead to rise in the cost of synthetic rubber, substitute of natural rubber. Even fall in the yen against the dollar also boosted the value of the Japanese currency as rubber is Tokyo based future; prices of rubber are also rising in international markets. Moreover floods in Thailand, the world’s largest natural-rubber producer have disrupted output over the past week.
Natural-rubber inventories monitored by the Shanghai Futures Exchange fell for an eighth week, losing 5,587 tons to 27,611 tons, a six-month low, based on a survey of 10 warehouses in Shanghai, Shandong, Yunnan, Hainan and Tianjin, the bourse said April 1.
“Technically, Rubber is bullish and traders can wait in their buying positions for the targets of 25750.” said Bharti Navlani, technical analyst with Commodity Online.




Rubber Climbs as Oil’s Rally Boosts Cost of Synthetic Products
MONDAY, APRIL 4, 2011

Rubber rallied to the highest in more than one week as oil reached a 30-month high, increasing the cost of rival synthetic products and boosting demand prospects for the commodity used to make tires.
The September-delivery contract rose as much as 4.1 percent to 444.7 yen a kilogram ($5,284 a metric ton), the highest since March 23, on the Tokyo Commodity Exchange and closed at 444.1 yen. The most-active contract lost 0.5 percent last week, the first drop in three weeks.
“High oil prices have underpinned rubber prices,” said Hiroyuki Kikukawa, general manager of research at IDO Securities Co. in Tokyo. A fall in the yen against the dollar also boosted the value of the Japanese currency-based Tokyo futures, he said.
Crude oil for May delivery gained as much as 0.7 percent to $108.74 per barrel in electronic trading on the New York Mercantile Exchange, the highest since price Sept. 24, 2008, and was at $108.44. Prices are up 25 percent from a year ago.
The yen was at 84.14 per dollar from 84.06 in New York on April 1. The Japanese currency declined 1.7 percent in March.
Floods in Thailand, the world’s largest natural-rubber producer, have disrupted output over the past week. Production may fall 50,000 tons, Luckchai Kittipol, president of the Thai Rubber Association, said on April 1.
Rubber for September delivery declined 0.7 percent to close at 34,635 yuan ($5,290) a ton on April 1 on the Shanghai Futures Exchange. Markets in China are closed today for a holiday.
Natural-rubber inventories monitored by the Shanghai Futures Exchange fell for an eighth week, losing 5,587 tons to 27,611 tons, a six-month low, based on a survey of 10 warehouses in Shanghai, Shandong, Yunnan, Hainan and Tianjin, the bourse said April 1.




NMCE Rubber jumps on tight supply
MONDAY, APRIL 4, 2011

NMCE rubber futures traded higher on heavy buying on previous losses on Saturday. From opening itself prices started trading positive on strong buying interest at lower levels. TOCOM futures market also traded positive on short covering on lower level on Friday. Domestic spot market continued the positive trend amid tight supply. Thus, positive cues from spot and international market supported the prices to witness good recovery at lower levels and prices resumed in green.
The rubbers futures are projected to continue the up trend good buying interest on Monday. TOCOM August futures are also trading higher at ¥434.20 per Kg. on follow through buying. Domestic spot market is reporting good buying which might support the Indian futures to trade higher today. However, corrections on profit booking can not be over ruled.
Factors to Watch For
As per deputy head of the China Rubber Industry Association, Natural-rubber demand in China, the biggest consumer, will rise 8% this year. Consumption will be 3.24 million metric tons, while tire output will climb 7.9 percent to an all-time high of 453 million units
As per the Committee on rubber policy of Thailand Government, Thai government will negotiate with commercial banks to extend loans to exporters to buy rubber from farmers at a minimum price of 120 baht per Kg
According to rubber board of India, Indian February Natural Rubber Output is 54,500 Tons Vs 51,500 Tons, consumption is 79,000 Tons Vs 76,350 Tons and imports are 6,831 Tons Vs 12,278 Tons
As per data released by rubber board, the year end deficit in natural rubber in India is estimated around 1.2 lakh tons and it is expected to be increase to 2 lakh tons during 2011-12
According to the Association of Natural Rubber Producing Countries, Consumption in China, India and Malaysia, representing 48% of global usage, will increase this year
DERIVATIVE ANALYSIS
Indian Futures (NMCE)
The NMCE April contract, prices and open interest are rising while volumes are declining. Market is attracting late buyers & early shorts; market is vulnerable to a sharp correction but likely that that correction will be bought creating a buy point for uptrend.
Japan Futures (TOCOM)
The TOCOM active August contract, prices are rising while volumes and open interest are falling. Market is running out of traders willing to open or hold an open long/buy. Traders are liquidating both loosing short positions & closing winning long positions. A higher probability the market is set to retrace in price lower at some point forward.
Shanghai Futures (SHFE)
The SHFE active July contract, prices, volumes and open interest all are falling. If the total open interest is falling off and prices are declining, the price decline is being caused by disgruntled long position holders being forced to liquidate their positions. Technicians view this scenario as a strong position technically because the downtrend will end as all the sellers have sold their positions, creating fresh buying opportunity at lower levels.




Who Dares Bet That NR Prices Will Fall In 2Q11?
MONDAY, APRIL 4, 2011

"The recovery in global auto car sales remains on track, with purchases in February posting a double digit gain for the second consecutive month. Russia is leading the way, with sales surging 80% year on year last month, and 77% year to date. Volumes have even started to improve in Western Europe, climbing 1% in February and reversing ten consecutive months of year on year decline," according to a March Global Auto Report by Scotiabank Group.
It added that the shutdown in Japan after the 11 March earthquake and subsequent tsunami have led to losses in vehicle production of about 14% of global vehicle output, and the major risks lie in the potential for auto parts shortages globally and its impact on the global supply chain as Japan is the world’s second largest auto parts exporter behind Germany, and hundreds of parts suppliers are located in northern Japan near the epicenter of the earthquake. Furthermore, the greatest risk remains in Asia, as nearly half of all Japanese auto parts shipments are destined to China and other Asian nations.
Auto sales in the U.S. – General Motors Co. (GM) said on Friday it sold 206,621 vehicles in March, up 11.4% from a year earlier on strong demand in the country despite U.S. gas prices jumped 25.1% last month. Meanwhile, Ford Motor Co. outsold General Motors Co. in March. It sold 212,777 cars and trucks, up 19.2% from a year earlier. Nevertheless, GM remained the dominant seller in 1Q11 with 592,545 vehicles sold compared with Ford’s 496,720 sales.
GM and Ford said the recovery of auto sales in the U.S. may continue in the face of Japan’s disaster, according to Bloomberg Newswires on 1 April. Global automakers may have lost production of 585,000 light vehicles in March including 550,000 in Japan, according to HIS Automotive Lexington, Massachusetts. Paul Ballew, chief economist for nationwide Mutual Insurance Co. in Columbus, Ohio said the issue in Japan should be temporary as there is enough slack capacity to make up for lost units.
Furthermore, GM continues to see U.S. auto sales rising to 13.5 million in 2011, including medium and heavy duty vehicles. Jenny Lin, Dearborn, Michigan based Ford’s senior U.S. economist said recently the Japan crisis should not derail the recovery in the U.S.
European car sales—European automakers benefited from government-backed scrapping incentives after the industry crisis hit Europe in late 2008. In 2011, automakers are looking to fast-growing markets like Chin and Brazil to offset sluggish sales closer to home. Spanish car sales fell for a ninth straight month, but new passenger car sales in France rose 6.1% in March, according to www.financialpost.com on 1 April.
Nissan Motor Co., the second-largest Japanese automaker, said on Friday that its auto sales still looked pretty good, at least where they were through May. The disruptions in Japan affect its sales to some extent, but it expects to get back soon.
J.D. Power & Associates said early March that auto sales in China would grow by 11.0% in 2011 after hitting 17.2 million last year, following growth rates of 33.0% in 2009 and 48.0% in 2008. In addition, the China Association of Automobile Manufacturers (CAAM) revealed that Chinese vehicle sales rose 4.6% year on year to 1.267 million units in February. Indian automobile industry also rose in March due mainly to a growing economy, increasing disposable incomes and low-interest rates in the country, according to www.smetimes.tradeindia.com.
The fall in the unemployment rate to 8.8% and the rise in payrolls to 216,000 workers in March in the U.S. are bringing back investor confidence. Stocks climbed on Wall Street on Friday 1 April. Manufacturing expanded, and companies stepped up hiring, earnings and hours stagnated, the U.S. Labor Department reported. The U.S. Federal Reserve meeting on 15 March pledged to continue its bond purchase program in order to promote the U.S. economic recovery while China still accelerated manufacturing for the first time in four months, and India grew for a twenty-fourth month, according a report by Bloomberg Newswires on 2 April.
Looking at natural disasters, the annual number of natural catastrophe events has clearly exhibited an upward trend since 1970, according to a recent analytical report by Thai Military Bank. Beyond any doubt, the data confirm that disasters worldwide have struck increasingly more and more each year. Since January 2010, we have seen major earthquakes in Chile, China, Haiti, and New Zealand and, most recently, Japan. Also floods, droughts and wildfires were rampant across the globe, from Australia to southern Thailand, it added. Economic losses during the past 10 years had incurred the largest losses including the current earthquake and tsunami in Japan, Hurricane Katrina, and the Chinese quake in 2008. It is evident that natural disasters partly cause supply shortages and push up commodity prices into new historical highs, such as sugar, palm oil, natural rubber etc last year as investors charge “asset return premiums” over risk-free returns.
The Movements of Global Stocks, Finance and Energy
Most Asian stock markets closed higher on Friday led by the Shanghai Composite Index, which climbed 1.3% to 2,967.41 on the back of a rise in Purchasing Managers Index (PMI) for March, while Japan's Nikkei Stock Average ended 0.5% lower at 9,708.39 as lingering worries over radioactive groundwater found just outside a troubled reactor building at the Fukushima Daiichi nuclear-power complex prompted investors to lock in recent gains. Elsewhere in the region, Australia's S&P/ASX 200 rose 0.5% to 4,861.80. Singapore's Straits Times index rose 0.5%, Indonesian shares added 0.8% and Thailand's SET tacked on 1.6%. Earlier in the day, New Zealand's NZX 50 added 0.4%.
European markets finished with strong gains on Friday, as most banks rallied after the results of Irish stress tests offered few surprises, while better-than-expected U.S. jobs data also lifted sentiment. The Stoxx Europe 600 index rose 1.5% to end at 280.02. The German DAX 30 index, largely supported by financials, pharmaceuticals and autos, gained 2% to 7,179.81, with shares of Deutsche Bank AG up 3.1%. Financials also lent support in Paris, where the CAC 40 index gained 1.6% to 4,054.76. In London, the FTSE 100 index gained 1.7% to end at 6,009.92.
The Dow Jones Industrial Average touched the highest level since the summer of 2008 on Friday due to stronger job creation in the U.S. than anticipated and the lowest unemployment rate of 8.8% in March. The DJIA rose for the second straight week and finished with an advance of 56.99 points, or 0.46%, at 12,376.72. The Standard & Poor's 500-stock index added 0.50% to 1,332.41, led by industrial and financial stocks. The Nasdaq Composite Index added 0.31% to 2,789.60. Those indexes also gained for the second straight week.
The dollar soared against the yen and Swiss franc but the euro after a stronger-than-expected U.S. jobs report lent credence to the story of an economy marching to recovery. The euro traded near a five-month high versus the dollar as the ECB interest rate outlook gained precedence over a downgrade of Portugal's government debt to near-junk status. Late Friday, the euro was at US$1.4233 from US$1.4158 late Thursday, according to EBS via CQG. The dollar was at Y84.04 from Y83.13, while the euro was at Y119.51 from Y117.70. The U.K. pound was at US$1.6120 from US$1.6035. The dollar was at CHF0.9244 from CHF0.9190.
Better-than-anticipated U.S. payrolls and a two-year low of 8.8% unemployment rate in March pushed up crude oil prices to fresh two and a half years highs on Friday. Light, sweet crude oil for May delivery on the New York Mercantile Exchange settled US$1.22 a barrel, or 1.1% higher at US$107.94 a barrel. That's the highest level since 25 Sept. 2008. Front-month May ICE North Sea Brent crude settled at US$118.70 a barrel, the highest price since 21 Aug. 2008, and up US$1.34 on the day.
The Rubber Market
The table below shows that rubber futures still wobbled during the week because speculators and funds still tied themselves to movements and impacts of oil and gold futures, exchange rates of the greenback against its rivals, bearish sentiments on the Middle-East violence and persistent radioactive leaks from nuclear plants in Japan, while disruption of NR supply in southern Thailand caused by heavy flooding since last weekend, persistent NR supply tightness in Malaysia and Indonesia and steady NR demand from tire and non-tire manufacturers worldwide except for Japan remained steady.
As the rubber market remained wobbly during the week, it is expected that we will see a tug-of-war between rubber futures and cash prices in the coming week. Many southern provinces in Thailand are still under water that damaged thousands hectares of rubber plantations after heavy rains hit southern Thailand last week.





Rubber market to continue uptrend this week
MONDAY, APRIL 4, 2011

KUALA LUMPUR: The Malaysian rubber market is expected to continue its uptrend this week on a continuous tight supply expectation, dealers said.
They said floods in Thailand, coupled with the wintering season in the producer countries, would continue to support prices.
Prices are also expected to follow the movement on the Tokyo Commodity Exchange, the global trendsetter of rubber prices.
For the week just-ended, rubber prices mostly took cue from the movement on the Tokyo and Shanghai futures markets.
Tyre-grade SMR 20 lost 12 sen to 1,516.0 sen per kg from 1,528.0 sen per kg previously, while latex-in-bulk gained 26 sen to 1,068.0 sen per kg on Friday, from 1,042 sen per kg, previously. Bernama