Rubber traders buying on exchanges

[gotlost]

Rubber traders buying on exchanges
Published: 24/05/2012 at 03:10 PM Online news: 3
Share 
Rubber shippers from Thailand, the world's largest producer, have started purchases on the Tokyo and Shanghai exchanges to shore up prices of the commodity used mainly in tyres and gloves, according to the Thai Rubber Association.

"Thai exporters have bought the rubber on the exchanges as it is cheap," President Prapas Euanontat said by phone on Thursday from the southern province of Nakhon Si Thammarat. He declined to specify the amount. Exporters will continue buying on overseas bourses "until local prices climb to 120 baht (US$3.80) a kilogramme, the level the government would like to see."

Futures have plunged 51 per cent from a record in February 2011, cutting costs for tire makers such as Bridgestone Corp and Michelin & Cie. China, the biggest user, expanded last quarter at its slowest pace in almost three years and Europe struggled to contain its debt crisis. Chinese vehicle sales dropped 1.3 per cent in the first four months, the worst performance since 1998, according to the China Association of Automobile Manufacturers.


 
Photo by Tawatchai Kemgumnerd

Thailand announced plans last week to buy more than 10,000 metric tonnes in Tokyo and Shanghai and to continue purchases from local farmers at above-market rates to drive prices higher. The country will also work with Indonesia and Malaysia to tackle the slump, according to Deputy Agriculture and Cooperatives Minister Nattawut Saikuar. The three countries represent about 70 per cent of global supply.

"At current prices, producers in Malaysia and Indonesia don't want to plant new trees," said Pongsak Kerdvongbundit, the group's honourary president. "Currently there is no shortage. But when the world economy recovers there won't be extra supply to fill any gap," he said on Wednesday on the sidelines of the 2012 World Rubber Summit in Singapore.

Global natural rubber consumption is set to expand 3.4 per cent to 11.3 million tonnes this year, while production climbs 3.2 per cent also to 11.3 million tonnes, the International Rubber Study Group said. The Chinese economy will expand 7.9 per cent this quarter from a year earlier, according to a Bloomberg survey. That would be the sixth quarterly deceleration after an 8.1 per cent expansion in the first three months.

"Prices will react negatively to lower demand," according to Chris Pardey, chief executive officer of RCMA Commodities Asia, a Singapore-based trading company. Output may top consumption by 400,000 tons in the six months to December after a seasonal deficit of 150,000 tonnes in the first half. Demand from China may be unchanged from last year at 3.8 million tonnes, he said this week, lowering an earlier forecast for two per cent to three per cent growth.

Rubber for delivery in October lost as much as 3.3 per cent to 260.6 yen a kilogramme ($3,278 a tonne), the lowest level for the most active contract since Jan 5, on the Tokyo Commodity Exchange. Futures last traded at 261.4 yen.

Thai production this year may total around 3.5 million tonnes as rains in the south, which represents 80 per cent of local supplies, have disrupted tapping, Prapas said. The country produced 3.57 million tonnes last year, according to the Rubber Research Institute of Thailand.

Additional supplies from Thailand are expected to slow as trees planted in the northeastern provinces, which are mature enough to be tapped, will generate low yields, said Pongsak.

"About 30 per cent of the northeast plantations will fail, either you won't be able to tap, or yields will be low because of inappropriate types of soil," said Pongsak.

Thailand started plantations in the northeast about seven years ago, expanding from traditional planting areas in the south which has limited space. Currently output from the northeast accounts for less than 10 per cent of total national output, Pongsak said. "In the south, we can only replant, as there's no available land for new plantations."

Global light vehicles sales may rise 5.2 per cent this year to 79.4 million units and expand 7.8 per cent to 85.6 million units in 2013, May Arthapan, director at LMC Automotive Thailand, said by e-mail. Sales gained 4.2 per cent last year.

Natural rubber accounts for as much as 40 per cent of tire weight, said Michel Rollier, former managing general partner at Michelin. "Replacement of natural rubber by synthetic rubber is limited and slow" because of its unique properties, he said at the World Rubber Summit in Singapore. "We expect natural rubber producers to control quality."

Bridgestone Corp, the largest producer of tires, has been conducting research on its plantations in Southeast Asia to improve productivity and quality, which is crucial for the company's plans to achieve products that help reduce carbon emissions and noise pollution, Chairman Shoshi Arakawa said Wednesday at the conference.