Natural Rubber Could Fall Further Despite Plans For A Floor Price

Natural Rubber Could Fall Further Despite Plans For A Floor Price
November 4, 2011





3 November 2011

With market sentiment remaining weak amid uncertainties in the global macro-economic environment, the general view emerging among natural rubber producers and consumers is that prices could fall further despite top producers seeking to support a floor price.

The International Rubber Consortium, representing Thailand, Indonesia and Malaysia, has called for a floor price of $4 a kilogram to be supported, but with little action to back it up, prices have already fallen below that level, with tire grade rubber currently being offered around $3.70/kg.

“The problem is that they have to find some way to instill confidence into the market, so that farmers and producers are convinced they can stick with that price [of $4/kg],” said Luckchai Kittipol, chief executive of Thai Hua Rubber Public Company Ltd., a leading exporter of Thai rubber.

With demand and supply more or less balanced and some suggesting even a small deficit, producers complain current prices are below what is justified by fundamentals.

The Association of Natural Rubber Producing Countries has estimated natural rubber supply to be about 10 million metric tons this year, leaving a 1-million ton deficit as global demand is expected to reach 11 million tons according to estimates by the International Rubber Study Group.

But signs of slowing demand growth and high stockpile of some 180,000 metric tons at the Qingdao port in China remained top concerns for delegates at a just-concluded industry conference here.

“There is a short-term concern that there is an oversupply of natural rubber with high stockpile in (the major rubber port of) Qingdao,” said Yeo Ek Meng, vice president and director of Singapore Exchange Ltd.

This has resulted in some defaults, with buyers not turning up for shipments, he said. Even consumers who need the commodity are on the sidelines, anticipating further weakness in prices.

Although delegates called for stronger action by ANRPC to support prices, there were no decisive measures announced at the conference.

Officials from ANRPC said the agency will advise re-planting if prices fell below a certain level. They didn’t, however, specify the level.

“We will encourage governments to go for intensive re-planting through an increase in re-planting subsidies, and reduce tapping intensity without sacrificing production, so as to reduce overheads,” said ANRPC’s senior economist, Jom Jacob.

In a presentation made at the conference, Jacob said a further decline in prices will in itself encourage farmers to replant, as maintaining older trees will prove uneconomical.

According to SGX’s Yeo, future price direction will largely depend on growth in China, the largest consumer and importer of the commodity.

Thai Hua’s Luckchai, who is also the honorary president of the Thai Rubber Association, said prices aren’t likely to fall below $3,500 a metric ton, as the market has already fallen nearly 40% from its peak in February.

“When prices were surging earlier this year, we called for a reduction in import taxes, but that was not successful. Now that prices are low, it’s a respite for all of us,” said China Rubber Industry Association’s deputy secretary-general, Mary Xu.

Xu, however, agreed that there is a need to stabilise prices in the long run.








Rubber Drops as Thai Floods Disrupt Car Output, Curbing Demand
November 4, 2011





Rubber declined on speculation the halt of vehicle production inThailand because of floods will reduce demand for the material used for tires.

April-delivery rubber lost as much as 2.5 percent to 288.5 yen a kilogram ($3,685 a metric ton) before trading at 291.8 yen on the Tokyo Commodity Exchange at 12:45 p.m. local time. The market was closed yesterday.

The Thai floods are resulting in the biggest supply disruptions in the automobile industry since the March 11 earthquake and tsunami in Japan. Floods spread across 64 of Thailand’s 77 provinces and swamped seven industrial estates where Honda Motor Co. and auto-parts makers have factories. Twenty five provinces remain inundated, the government said.

“Demand in the country and overseas has slowed after Japanese carmakers cut production,” said Chaiwat Muenmee, analyst at Bangkok-based commodity broker DS Futures Co. “We don’t know how long the floods will last. This is negative factor to the rubber markets.”

Toyota Motor Corp., Asia’s biggest carmaker, will scale back production in Japan for a third week and suspend overtime in North America for a second week as disruptions from the flooding spread worldwide. Japanese factories’ reduced hours, which began Oct. 24, will be extended until at least Nov. 12, the Toyota City, Japan-based carmaker said on its website.

Worldwide Disruption

Plants in the U.S. and Canada will continue to suspend overtime and Saturday output while facilities in South Africa, Indonesia, the Philippines, Vietnam, Pakistan and Malaysia will also reduce production next week, it said.

Honda Motor plans to reduce production in Brazil, England and the Philippines because of parts shortages, said Keitaro Yamamoto, a spokesman for the company.

In Shanghai, January-delivery rubber jumped 4.9 percent to 27,075 yuan ($4,243) a ton after falling 4.3 percent yesterday. In a cash market, the benchmark Thai price dropped 0.4 percent to 116.65 baht ($3.80) a kilogram yesterday, according to the Rubber Research Institute of Thailand.







Toyota, Nissan extend Thai flood production halts
November 4, 2011





Japanese automakers Toyota and Nissan on Friday said they had extended production suspensions at their factories in Thailand due to the impact of severe flooding on parts supply.

Japan’s biggest automaker Toyota said in a statement that its three sites in Thailand, which have been suspended since October 10, would remain closed until at least November 12.

Nissan said it would halt production until at least November 14.

The impact of the deadly flooding in Thailand has come as Japan’s automakers worked to recover from the March earthquake and tsunami disaster, which also crippled supply chains and hit global production.

Toyota said the Thai floods will mean continued production adjustments at plants in the United States, Canada, South Africa, Indonesia, the Philippines, Vietnam as well as Pakistan and Malaysia from November 7.

“A decision on production from November 14 onward will be made based on an assessment of the situation as it develops,” Toyota said.

A company spokesman told AFP that the production halt would mean the loss of around 69,000 units, or just over 10 percent of Toyota’s Thailand output, since the company suspended production at its three plants on October 10.

Toyota manufactured 630,000 vehicles in Thailand in 2010. The impact of the production adjustments in Japan is expected to affect around 22,000 units between October 24 and Friday, spokesman Dion Corbett added.

“The main issue is that the effect on suppliers is actually changing all the time so it’s making it difficult for us to actually understand exactly which parts and from where have been affected at which times,” Corbett told AFP.

“The first measure is actually getting a better understanding of exactly what is happening.”

Toyota stopped production at its Samrong, Gateway and Ban Pho plants from October 10 as some suppliers were hit by Thailand’s worst flooding in decades, causing delays in supplying parts.

The flooding has had no direct impact on the three Toyota plants, it said.

Rival automaker Nissan said production at its Thailand factory would remain halted until November 14. The plant has not been directly hit by the flooding either, but Nissan is also facing parts supply shortages.

Nissan said its production loss in Thailand was estimated at 40,000 units.

“Due to shortages in parts supply, production at the plant remains suspended, but Nissan is working to resume production of most models starting on November 14,” it said in a statement.

It added that the flood-related supply problems had not affected production at Nissan facilities outside of Thailand, but added that it saw a risk of a 20,000 unit production loss in Japan.

Automaker Honda has also been hit, with one of its plants inundated and its production in Japan, the US, Canada and in several Asian countries affected.




Rubber Futures Pare Weekly Loss on Greek Bailout Optimism, Oil
November 4, 2011





Nov. 4 (Bloomberg) — Rubber gained for the first time in four days, paring a weekly loss, as oil climbed and after Greece reduced the risk of a disorderly default by abandoning a referendum on a bailout plan.

April-delivery rubber gained as much as 1.7 percent to 298 yen a kilogram ($3,818 a metric ton) before settling at 293.5 yen on the Tokyo Commodity Exchange. The market was closed yesterday. The most-active contract fell 5.1 percent this week after surging 9.6 percent the previous week.

Oil rose a third day to trade near the highest in three months in New York after Greece decided not to hold a public vote on a bailout package, Finance Minister Evangelos Venizelos told lawmakers in Athens yesterday.

“Signs that European problems may be contained helped spur buying of riskier assets, erasing earlier losses of rubber futures,” Sureerat Kunthongjun, an analyst at AGROW Enterprise Ltd., said by phone from Bangkok. Any upside is limited due to concerns over the impact of flooding in Thailand, the world’s largest rubber producer, she said.

The floods are resulting in the biggest supply disruptions in the automobile industry since the March 11 earthquake and tsunami in Japan. Floods spread across 64 of Thailand’s 77 provinces and swamped seven industrial estates where Honda Motor Co. and auto-parts makers have factories. Twenty five provinces remain inundated, the government said.

“Demand in the country and overseas has slowed after Japanese carmakers cut production,” said Chaiwat Muenmee, analyst at Bangkok-based commodity broker DS Futures Co. “We don’t know how long the floods will last. This is negative factor to the rubber markets.”

Worldwide Disruption

Toyota Motor Corp., Asia’s biggest carmaker, will scale back production in Japan for a third week and suspend overtime in North America for a second week as disruptions from the flooding spread worldwide. Japanese factories’ reduced hours, which began Oct. 24, will be extended until at least Nov. 12, the Toyota City, Japan-based carmaker said on its website.

Honda Motor plans to reduce production in Brazil, England and the Philippines because of parts shortages, said Keitaro Yamamoto, a spokesman for the company.

In Shanghai, January-delivery rubber jumped 6.2 percent to close at 27,410 yuan ($4,319) a ton after falling 4.3 percent yesterday. In a cash market, the benchmark Thai price declined for a fourth day, falling 0.4 percent to 116.15 baht ($3.79) a kilogram today, according to the Rubber Research Institute of Thailand.





Market on Nov 4: Spot rubber under pressure on global cues
November 5, 2011





Kottayam, Nov. 4:

Spot rubber continued to remain under pressure on Friday. Declines in domestic futures and unhealthy reports from the international markets were putting immense pressure on the physical market and it lacked follow-up buying from traders or major consuming industries. Despite reports that arrivals and stocks in warehouses were low amidst peak production season, the commodity was already under the shadow of a gloomy and uncertain macro economic outlook.

Sheet rubber closed at Rs 205.50 (207) a kg, said traders. The grade weakened to Rs 206 (207.50) a kg both at Kottayam and Kochi, according to the Rubber Board.

The November series dropped to Rs 206 (206.81), December to Rs 203.50 (204.20), January to Rs 203.65 (204.78), February to Rs 205 (205.98) , March to Rs 207.10 (209) and April to Rs 209.99 (209.10) a kg on the National Multi Commodity Exchange.

RSS 3 (spot) slipped further to Rs 186.27 (186.69) a kg at Bangkok. The November futures improved to ¥287.5 (Rs 181.30) from ¥285.4 a kg during the day session but then dropped to ¥284 (Rs 179.10) a kg in the night session on the Tokyo Commodity Exchange.

Spot rates were (Rs/kg): RSS-4: 205.50 (207); RSS-5: 203 (205); ungraded: 193 (197); ISNR 20: 192 (196) and latex 60 per cent: 125.50 (126.50).







Market on Nov 5: Mixed trend in rubber
November 6, 2011





Kottayam, Nov. 5:

Physical rubber prices showed a mixed mood on Saturday. The weekend session was almost inactive owing to a vehicle strike to protest against the recent petrol price hike.

The November series closed at Rs 205.79 (205.99), December at Rs 204 (203.48), January at Rs 204.01 (203.94), February at Rs 205.50 (205.00), March at Rs 206.50 (207.43) and April at Rs 210.84 (209.99) a kg on the National Multi Commodity Exchange.

Spot rates were (Rs/kg): RSS-4: 205 (205.50); RSS-5: 203 (203); ungraded: 193 (193); ISNR 20: 190 (192) and latex 60 per cent: 125.50 (125.50).





Malaysia: Rubber mart expected to fall further next week
November 6, 2011





The Malaysian rubber market is expected to fall further next week due to sluggish demand and uncertainties in the global economy.

A dealer said demand was expected to be slower on news that Japanese carmakers would keep its Thai factories suspended due to shortage of parts.

Floods have spread across 64 of Thailand’s 77 provinces and swamped seven industrial estates where Honda and auto-parts makers have factories.

Meanwhile, dealers said the rainy season in most rubber producing countries would not disrupt supply as China’s Qingdao port had a high stockpile of some 180,000 metric tonnes.

Buyers were expected to remain on the sidelines, anticipating further weakness in prices, they said.

This week, the Malaysian Rubber Board’s official physical price for tyre-grade SMR 20 declined 94.0 sen to 1,137.0 sen per kg while latex in bulk fell 35.0 sen to 758.5 sen per kg.

The unofficial closing price for SMR 20 slipped 89.5 sen to 1,136.5 sen per kg while latex in bulk dropped 37.0 sen to 757.5 sen per kg. — Bernama







Tocom rubber likely to be weaken in November
November 6, 2011





Tokyo rubber futures are expected to weaken in November as the debt crisis in Europe continues to rattle financial markets and cloud the outlook for the world economy, but a seasonal fall in physical supply may provide support, a Reuters poll showed.

The benchmark sixth-month rubber contract on the Tokyo Commodity Exchange (TOCOM), currently April 2012, was forecast to be at 290 yen per kg at the end of November, according to the poll conducted late last week. That was 5.8 percent lower than the actual closing price at the end of October of 307.9 yen and well below the previous forecast in a similar poll early last month of 320 yen.

The landscape has changed dramatically since the latest forecasts came in, with the Greek government, out of the blue, calling a referendum on a bail-out deal agreed with the European Union. “The European debt crisis will definitely weigh on the global financial markets as well as rubber futures,” said a trader in Hat Yai, the centre of Thailand’s rubber centre.

TOCOM futures fell more than 3 percent on Wednesday morning in response to the developments in Europe. At 0540 GMT, April 2012 futures stood at 290.6 yen. “Another negative factor this week that could add to the downward pressure on prices is the MF bankruptcy,” said a Bangkok-based dealer, referring to futures broker MF Global Holdings Ltd. The bankruptcy, and especially news that the broker had failed to keep its customer accounts separate from its own funds, could make investors nervous about putting money into futures.

SEASONAL SUPPLY FALL The benchmark TOCOM contract was forecast to rise slightly to 300 yen per kg by the end of December. “Prices should be higher at the end of the year due to falling supply in Thailand,” said a Tokyo-based trader. Thailand is the world’s biggest rubber producer. The bulk of its rubber is produced in the south, which has not been affected by the devastating floods elsewhere in the country.

However, the rainy season in the south is due to start in November and run until the end of December, disrupting tapping and therefore reducing supply. Thailand’s benchmark smoked rubber sheet (RSS3) was forecast to be at $3.95 per kg at the end of November and $4.00 at the end of the year. It was at $4.00 at the end of October but had fallen to $3.80 by Wednesday, November 2.