Global Tire Demand Exceeding Supply Helps Bridgestone, Goodyear, Sumitomo
FRIDAY, MAY 27, 2011

Global tire demand is expanding at a faster pace than production, led by growth in China, as vehicle sales are increasing, Sumitomo Rubber Industries Ltd. (5110) said.
Tire sales in China, the world’s largest auto market, may increase 30 percent this year, or at 10 times the global rate, President Ikuji Ikeda said in an interview. Sumitomo Rubber, the largest Japanese tiremaker after Bridgestone Corp. (5108), said sales will increase 3.1 percent to 93.7 million tires this year.
Rubber prices climbed 38 percent in the past year and reached a record in February after auto sales in China surged 32 percent in 2010 to an all-time high, surpassing the U.S. market for a second year. Increasing costs spurred tiremakers from Bridgestone to Akron, Ohio-based Goodyear Tire & Rubber Co. to raise prices. Commodities beat stocks, bonds and the dollar for five straight months through April, prompting central banks from Beijing to Brasilia to raise interest rates to cool inflation.
“Tire supply/demand is tight globally and particularly in North America,” Goldman Sachs Group Inc. analysts including Yuichiro Isayama said. “In contrast to many makers that retrenched due to the financial crisis, Bridgestone and Sumitomo Rubber increased capacity and are benefitting from growth in demand amid a global supply shortage,” they said May 12.
Bridgestone shares advanced 24 percent in the past year and traded at 1,825 yen in Tokyo today, while Sumitomo Rubber shares increased 15 percent to 923 yen.
China Sales
While auto sales in China reached a record 18 million last year, they slowed in 2011 as the nation increased retail gasoline and diesel prices and tightened monetary policy to cool the fastest inflation since 2008. The government increased interest rates and raised bank reserve-ratio requirements to curb price gains that have exceeded the government’s 4 percent target every month this year. Demand for replacement tires is growing in China as car ownershipexpands, Ikeda said.
Sumitomo Rubber, which controls about 6 percent of the global tire market, said it can process 46,000 tons of rubber a month this year, up 3.5 percent from last year. The Kobe-based company said May 17 it is building a plant in Brazil that will have a capacity of 2,200 tons a month by 2013 and is also expanding production capacity in Thailand and China.
“Our production capacity is not large enough to meet expanding demand,” Ikeda said in Tokyoon May 25. “The shortage may worsen” as global consumption is expected to grow by 3 percent annually in coming years, he said.
Tire Demand
Global sales of passenger-car tires are forecast to grow 6.1 percent this year from 2010, while sales of commercial- vehicle tires are forecast to rise 11 percent, International Rubber Study Group forecast on Jan. 26.
Natural-rubber production in key growing countries may miss estimates this year as output slows in the second quarter, the Association of Natural Rubber Producing Countries said yesterday. Production from member countries, representing 92 percent of global supply, may expand 4.9 percent, less than the 5.8 percent forecast last month, the group said in an e-mailed report.
Rubber futures in Tokyo tumbled to 335 yen a kilogram ($4,098 a metric ton) on March 15 from a record high of 535.7 yen reached on Feb. 18. The March 11 earthquake and tsunami disrupted supplies of car parts, forcing Toyota Motor Corp. and rivals to slash output and stoking concerns that tire demand from automakers will weaken. Futures traded at 387.3 yen at 1:06 p.m. local time.
Pre-Quake Level
The disaster will reduce tire sales for new cars in Japan by about 2 million units from March to June, Ikeda said. The loss may be recouped in the second half of this year as automakers step up efforts to restore production, he said.
“Some of the carmakers may return their production to pre- quake levels by July,” Ikeda said.
The company plans to use 505,000 tons of natural and synthetic rubber this year for tire production, gaining 6.5 percent from last year. Natural rubber represents more than half of the volume, said Shizuma Kubota, general manager at Sumitomo Rubber’s public relations department.
More than 80 percent of the natural rubber used by the company is technically specified rubber, which is cheaper and easier to process than ribbed-smoked-sheet rubber, Ikeda said.
Technically specified rubber for June delivery on the Singapore Exchange closed at $4.62 a kilogram yesterday. The price reached a record $5.75 on Feb. 10 amid speculation the supply shortage may worsen after heavy rains disrupted output in Thailand, Indonesia and Malaysia -- the top-three producers.
Seasonal Increase
Ribbed-smoked-sheet rubber for June delivery on the Singapore bourse closed at $5.14 a kilogram yesterday, retreating from a record $6.488 reached on Feb. 17.
The company expects to buy so-called TSR-20 rubber at $5.5 a kilogram on average for the second quarter of this year, $5.2 for the third quarter and $5 for the fourth quarter as a seasonal increase in supply from Thailand, the world’s largest producer and exporter, will put a drag on prices.
“I don’t expect the price will exceed $6,” Ikeda said. Supply will also increase as trees planted five to seven years ago in Southeast Asia will become available for tapping, he said.




Rubber prices to depend on Japan’s recovery
FRIDAY, MAY 27, 2011

By Jithendra Antonio
Though future of rubber prices are encouraging, Chairman of Balangoda Plantations PLC (BALA) Harry Jayawardena said, all depends on factors such as the change in global weather patterns, and Japan’s recovery.
Jayawardena in his review for the financial year ended in 31 December 2011 said, tensions spreading across the Middle East will also affect future of Rubber prices. In the lately published annual report of Balangoda Plantations PLC, Jayawardena goes on to explain that the country’s rubber production has recorded an increase of 16 million kilogrammes during 2010, in spite of unfavourable weather conditions experienced during the 3rd and the 4th quarters in the Sabaragamuwa District.
“Rubber prices have been at better levels last year,” Jayawardena notes adding that the main driving force being emerging economies of China and India where car production leapfrogged. “There were instances when the price of Sheet Rubber exceeded the premium grades of Crepe in 2010, which was mainly due to the increased rubber demand for tyre and automobile industries.”




Tokyo futures at 1-month high
FRIDAY, MAY 27, 2011

BANGKOK: Tokyo rubber futures rose to a one-month high on Thursday on the back of firmer oil prices and rising Shanghai rubber futures, but profit-taking limited the gains, dealers said.
The newly launched benchmark contract on the Tokyo Commodity Exchange for November delivery rose 2.5 yen to settle at 391.4 yen ($4.773) per kg. It rose as high as 392.2 yen, the highest since April 28.
"Players, as well as investment funds, resumed buying contracts again after seeing a rise in other commodities, while strongerShanghai futures provided additional support," said a Tokyo-based trader.
The most-active Shanghai rubber contract for September delivery rose 395 yuan to finish at 32,690 yuan ($5,033.933) per tonne.
Brent crude rose above $115 a barrel on Thursday due to a softer dollar and an unexpected drop in US distillate stocks, which overshadowed gains in gasoline and crude inventories.
However, dealers said small players took profit when prices broke above 390 yen per kg, capping further rises.
Dealers said TOCOM rubber could rise further on Friday after finishing above the key resistance of 390 yen, but the rise was seen as capped, with players still cautious about recent rises.




Tokyo Futures Rise On Higher Oil, Share Prices
FRIDAY, MAY 27, 2011

Tokyo rubber futures climbed early on Thursday (May 26) as a rebound in oil prices to two-week highs and rises in share prices brightened market sentiment.
FUNDAMENTALS
The key Tokyo Commodity Exchange rubber contract for November delivery, which debuted on Thursday (May 26), stood at at 389.1 yen per kg as of 0040 GMT.
The previous benchmark contract for October delivery was up 9.3 yen, or 2.4 percent, at 395.1 yen, after settling up 2.6 percent on Wednesday at 385.8 yen ($4.709) per kg. That was the highest since May 19 and above resistance of 385 yen.
The May TOCOM rubber futures contract expired at 408.0 yen per kg on Wednesday (May 25), down 9.7 percent from the April contract's 451.6 yen expiry price.
Deliveries against the May rubber contract fell 21 percent from April, to 241 lots or 1,205 tonnes, the exchange said on Wednesday (May 25).
The most active Shanghai rubber contract for September delivery rose 680 yuan to finish at 32,295 yuan ($4,969.555) per tonne on Wednesday (May 25).
Oil prices rose 2 percent on Wednesday (May 25), climbing to two-week highs as an unexpected drop in U.S. distillate inventories trumped a sharp rise in gasoline stocks and as a softer dollar supported fresh commodities buying.
The dollar rose 0.1 percent to 81.98 yen against the yen. The euro came under further pressure against the dollar as investors fretted about Greece's ability to repay its debts.
MARKET NEWS
Delphi Automotive filed to raise up to $100 million in an initial public offering, the U.S. auto supplier said in a securities filing on Wednesday (May 25), less than two years after emerging from bankruptcy.
Electric car maker Tesla Motors Inc plans to raise up to $214 million through a share offering to help fund development of its Model X SUV, and said its chief executive would buy a portion of those shares.
The Nikkei stock average gained on Thursday (May 26), bouncing off a two-month closing low hit the previous day, helped by a rise in Wall Street shares and commodity prices, though market players said it was too early to say risk reduction has run its course.
U.S. stocks ended a three-day losing streak on Wednesday (May 25) as recent underperformers led a thinly traded rally that wasn't seen as strong enough to overcome worries about waning global demand.
(Reuters, May 26, 2011)




India: Spot rubber rules steady
FRIDAY, MAY 27, 2011

KOTTAYAM, MAY 26:
Spot rubber finished unchanged on Thursday. Market activities were dull as there were no active participants, on either side, to set a definite trend. Major manufacturers were seen almost inactive.
According to traders, sheet rubber was steady at Rs 217 a kg amidst scattered transactions. The grade dropped to Rs 217 (217.50) a kg both at Kottayam and Kochi, according to Rubber Board.
The June series weakened to Rs 216.56 (218.43), July to Rs 220.50 (221.67) and August to Rs 219.63 (220.69) while the September series firmed up to Rs 218.50 (217.47) a kg for RSS 4 on the National Multi Commodity Exchange.
RSS 3 improved at its June futures to ¥417 (Rs 230.97) from ¥409 a kg during the day session but then remained inactive in the night session on the Tokyo Commodity Exchange. The grade (spot) increased to Rs 233.32 (231.17) a kg at Bangkok.
Spot rates were (Rs/kg): RSS-4: 217 (217); RSS-5: 214 (214); ungraded: 212 (212); ISNR 20: 209 (209) and latex 60 per cent: 130 (130).





NR prices remain unchanged
FRIDAY, MAY 27, 2011

Tokyo -- Prices on Tokyo’s rubber exchanges eased slightly overnight.
On Tokyo's Tocom Exchange, prices for the six-month contract eased by about yen 1, trading at yen 387 ($4.73) per kg on Thursday 26 May. Shorter-dated prices moved up slightly, trading at around 413.
In Singapore, SGX said short-dated RSS3 were trading up by 4 cents at around $5.14 with longer-dated contracts up by around $0.10 at around $4.98. Short-dated TSR 20 was trading up at $4.60.
In India, the NMCE saw June deliveries ease slightly, to close at around Rs218.4 ($4.82) per kilo
In China, the Shanghai Futures Exchange also saw prices rise by a fraction of a yuan, with June deliveries trading at around Yuan 34.8 ($5.36) per kilo.