Rubber Drops as Weaker China Manufacturing Stirs Demand Concern (July 01)

Rubber Drops as Weaker China Manufacturing Stirs Demand Concern (July 01)
| July 1, 2011




Bloomberg – Rubber decreased for the first time in four days after a Chinese manufacturing index dropped to the lowest level since February 2009, stoking concern that demand from the world’s largest consumer may weaken.

The December-delivery contract lost as much as 0.9 percent to 361.6 yen a kilogram ($4,479 a metric ton) before settling at 364.2 yen on the Tokyo Commodity Exchange. The most-active contract lost 6.6 percent in June and tumbled 15.6 percent in the April-June quarter after reaching an all-time high of 535.7 yen on Feb. 18.

The Purchasing Managers’ Index was at 50.9 in June compared with 52 in May, the China Federation of Logistics and Purchasing said today. It was below the median forecast of 51.5 in a Bloomberg News survey of 13 economists, signaling that Premier Wen Jiabao’s campaign to tame inflation may damp growth in the world’s second-biggest economy.

“The weak number from China raised concern that the nation’s raw-material demand may be weakening,” Kazuhiko Saito, an analyst at broker Fujitomi Co. in Tokyo, said by phone today.

Manufacturing, which accounts for about half of China’s economy, is moderating as government policies curb demand for housing and cars, power shortages crimp output and monetary tightening limits company funding.

“Economic expansion is losing some steam after a period of aggressive tightening,” said Chang Jian, a Hong Kong-based economist at Barclays Capital. “Slower growth is not bad as it can help contain inflation.”

The People’s Bank of China has paused for 12 weeks in raising benchmark rates, the longest gap since increases began in October. Morgan Stanley estimates that consumer prices rose 6.2 percent in June, the most since July 2008.

Japanese Pessimism

Rubber was also sold as a report showed today that Japan’s largest manufacturers were more pessimistic about their prospects than economists had forecast, an indication the March 11 earthquake and tsunami may have a more severe impact on business plans than initially thought.

The quarterly Tankan index of sentiment at large manufacturers fell to minus 9 in June from 6 in March, the Bank of Japan said in Tokyo. The median estimate of 27 economists surveyed by Bloomberg News was for a reading of minus 7. A negative number means pessimists outnumber optimists.

“The global economy is starting to slow,” said Ryutaro Kono, chief economist at BNP Paribas SA in Tokyo. “The downside risks to China and other emerging economies seem to be on the rise.”

The physical price of Thai rubber was unchanged at 142.15 baht ($4.63) a kilogram today, according to the Rubber Research Institute of Thailand.

Output Increases

Global natural-rubber production will increase faster than demand this year and in 2012 after farmers boosted output following a jump in prices, according to forecasts from the International Rubber Study Group.

Global supply will climb 5.6 percent this year and 8.2 percent in 2012, the group said in a statement today. Natural- rubber demand may gain 3.8 percent this year and 5.4 percent in 2012, it said, without giving figures for underlying amounts.

The forecast expansion in global production is “partly due to the impact of higher prices, and assuming normal growing conditions,” the Singapore-based group said.

In Shanghai, September-delivery rubber gained 0.2 percent to close at 31,935 yuan ($4,939) a ton.





Tokyo futures dip on fall in oil, rise in supply
July 1, 2011




BANGKOK, July 1 (Reuters) – Tokyo rubber futures edged lower on Friday due to a fall in oil prices and an increase in rubber supply from big producing countries, dealers said.

The benchmark rubber contract on the Tokyo Commodity Exchange <0#JRU:> for December delivery fell 0.8 yen to settle at 364.2 yen ($4.52) per kg.

The most active Shanghai rubber contract for September delivery rose 70 yuan to finish at 31,935 yuan ($4,940) per tonne.

“Actually, rising supply was already weighing on prices. However, falling oil prices encouraged players to sell contracts further,” one dealer said.

The heavy rain that hit top producer Thailand for weeks has stopped, allowing farmers to tap more latex, so supply is likely to rise gradually.

Oil prices fell on Friday after data from China showed factory output grew at its slowest pace in 28 months, raising concern about sluggish fuel demand from the world’s second largest importer.

The International Rubber Study Group said on Friday global demand for rubber, both natural and synthetic, was forecast to rise to 25.7 million tonnes in 2011, down slightly from an estimate of 26.1 million tonnes in March but still higher than last year.

TOCOM rubber was expected to rebound next week as technical sentiment remained firm after prices finished above a major support level at 360 per kg, dealers said.





IRSG forecasts 5 percent growth in rubber demand in 2011
July 1, 2011




Singapore — The April-June 2011 editions of the Rubber Statistical Bulletin and the Rubber Industry Report are now available from the International Rubber Study Group. The Group forecasts that global rubber demand will reach 25.7 million tonnes in 2011 and 27.6 million tonnes in 2012. Global SR demand is expected to grow by 5.0 percent in 2011 and 9.0 percent in 2012, while global NR demand is forecast to rise by 3.8 percent in 2011 and 5.4 percent in 2012.

In 2010 global rubber consumption reached 24.6 million tonnes in 2010, 15.3 percent higher than in 2009, reflecting a strong recovery in the demand for vehicles and tyres. Global SR production was 14.1 percent higher than in 2009, in line with the strong recovery seen in SR consumption, while global NR supply was 7.2 percent higher than in 2009.





Oil Drops on Signs of China, U.S. Slowdown; IEA and OPEC Supplies Increase
July 1, 2011




Bloomberg – Oil declined, trimming the biggest weekly gain in almost three months, as signs of slowing manufacturing growth in China and the U.S., the world’s biggest energy users, stoked speculation fuel demand may falter.

Futures slipped as much as 1.3 percent, their first decline in four days, after China’s Purchasing Managers’ Index fell to the lowest since February 2009. A U.S. report today may show a slowdown in factory activity. Prices also slid as OPEC boosted supplies and the U.S. offered 30 million barrels of oil from strategic reserves under an International Energy Agency plan to stabilize prices.

“Weak Chinese PMI, and potential profit-taking in the crude oil market after a 10 percent rally this week, is likely to weigh today,” Filip Petersson, Stockholm-based commodity strategist at SEB AB said in a note today.

Crude for August delivery on the New York Mercantile Exchange declined as much as $1.24 to $94.18 a barrel and was at $94.59 at 10:39 a.m. London time. The contract yesterday rose 65 cents to $95.42. Prices have risen 29 percent in the past year and 3.8 percent this week.

Brent oil for August settlement slid $1.23, or 1.1 percent, to $111.25 on the London-based ICE Futures Europe exchange. The European benchmark contract traded at a premium of $16.66 to WIT. The spread reached a record $22.29 a barrel on June 15.

China Slowdown

China’s Purchasing Managers’ Index fell to 50.9 in June from 52 in May, the China Federation of Logistics and Purchasing said in an e-mailed statement today. The median forecast in a Bloomberg News survey of 13 economists was 51.5. A reading above 50 indicates expansion.

China’s report “affirms their tightening of monetary policy is taking effect and impacting oil demand,” said Serene Lim, a commodity strategist at Australia & New Zealand Banking Group Ltd. in Singapore. “China is where the growth is and having this kind of manufacturing activity data slowing down might be affecting the markets.”

A report today may show U.S. manufacturing also slowed last month. The Institute for Supply Management’s factory index fell to 52 from 53.5 in May, according to the median estimate of 77 economists in a Bloomberg survey.

Oil dropped early yesterday after the Labor Department reported that U.S. jobless claims fell less than expected in the week ended June 25. Claims slid by 1,000 to 428,000, compared with the median forecast of economists in a Bloomberg News survey of a drop to 420,000.

IEA Release

IEA members will release 60 million barrels of oil from strategic reserves over 30 days beginning at the end of this week to make up for a Libyan production shortfall and curb high prices, the agency said June 23. Half the crude will come from the U.S. Strategic Petroleum Reserve.

The U.S. offered light, sweet crude as part of the release. More than “90 offers to purchase oil were received” on June 29, the Energy Department said yesterday. Contracts will be completed by July 11, the agency said. The administration will continue to monitor oil supply and is prepared to act further, according to a government official.

The Organization of Petroleum Exporting Countries’ production rose by an average 210,000 barrels a day in June to 29.105 million, the highest since February, a Bloomberg News survey of oil companies, producers and analysts showed. Saudi Arabia increased crude output by 3.2 percent to a 32-month high. Daily output by the 11 members with quotas, all except Iraq, climbed 180,000 barrels to 26.4 million, 1.555 million barrels above their target.

Oil Survey

Oil futures will probably fall next week amid signals that the economy is slowing as the first oil from strategic reserves enters the market, a Bloomberg News survey showed.

Fourteen of 36 analysts, or 39 percent, forecast oil will drop through July 8. Eight respondents, or 22 percent, predicted prices will increase and 14 estimated there will be little change. Last week, 44 percent of those surveyed said futures would drop.

August oil in New York faces resistance at about $96.05, the 200-day moving average, and $96.20, the middle of a Bollinger chart, according to Addison Armstrong, director of market research at Tradition Energy in Stamford, Connecticut.

Nymex crude, trading above its 55-week moving average amid a gain this week, will resume declines should prices fall below support levels at about $89, according to Citigroup Inc.

Crude has “decent support” at $89.07 to $90 a barrel, technical analysts Tom Fitzpatrick, Shyam Devani and Alex Good said in a report dated yesterday. That range is where the bottom of an ascending channel coincides with the 55-week moving average and the 50 percent Fibonacci retracement of oil’s rally from last year’s low, the analysts said.