Rubber May Extend Rebound on Export-Curb Plan, Quake Rebuilding

Rubber may extend a rebound from a four-month low as exporting nations said they may curb shipments and demand from the auto industry in China, the largest consumer, and rebuilding efforts in quake-hit Japan spur buying.
“The underlying supply-and-demand imbalance, where there‟s basically insufficient supply, isn‟t going to disappear very quickly,” said Peter Kelly, head of tire and rubber research at LMC International Ltd. “Demand will still be very strong.”
Rubber has jumped after Thailand, the largest producer, asked exporters to halt shipments and as tire plants in Japan resumed production after last week‟s earthquake. Harvests in Thailand, Indonesia and Malaysia will fail to meet demand for a second year in 2011, Goldman Sachs Group Inc. estimates. Annual vehicle sales in China surged about 10-fold in the past decade.
“Prices may rise again after the recent drop,” Sun Huaijian, general manager for commercial tire department at Giti Tire (China) Investment Co., said in an interview yesterday (Mar 17) in Qingdao, China. “Governments of producing countries will introduce various policies to stem the decline in prices.”
Thailand, Indonesia and Malaysia, the biggest producers, will probably delay shipments to counter a price slump, according to International Rubber Consortium Ltd. In 2009, the three nations cut exports to combat a 56 percent price slump amid the global financial crisis.
Thailand‟s Deputy Prime Minister Suthep Thaugsuban said this week that he‟d asked exporters to suspend shipments to stem the plunge in prices and will ask banks to offer low-interest loans to help shippers stockpile the raw material.
Record Price
August-delivery futures climbed as much as 7.2 percent 425.5 yen per kilogram on the Tokyo Commodity Exchange and were at 413.1 yen at 10:17 a.m. today (Mar 18). The price, which reached a record 535.7 yen on Feb. 18, plunged to 335 yen March 15, the lowest intraday price since Nov. 4, after Japan‟s strongest earthquake and a tsunami forced manufacturers to halt production.
The 9.0 quake and tsunami hit northeastern Japan on March 11, damaging several nuclear reactors and killing at least 4,277 people. Technicians have struggled to contain fires and radiation leaks at the Fukushima Dai-Ichi nuclear power station north of Tokyo as rescue workers battled to come to terms with the aftermath of the quake, which has left hundreds of thousands stranded without food and water.
Toyo Tire & Rubber Co. suspended most operations at three plants in northern Japan, the company said yesterday (Mar 17). Toyo Tire gave no timeframe for resuming operations, saying the facilities were not badly damaged.
Quake Assessment
Still, natural-rubber demand won‟t be significantly affected by the earthquake, the Association of Natural Rubber Producing Countries said on March 15. Japan accounts for 7 percent of global natural-rubber demand.
“People are concerned that Japan‟s earthquake may slow or derail the global economic recovery, because it‟s a big economy,” Forest Hu, manager at the rubber department of PKU Founder Commodities Group Co. Still, “the earthquake alone can‟t justify the slump we saw in prices.”
Prices had lost as much as 37 percent from the Feb. 18 record as worsening Middle East tensions and slowing car sales growth in China raised concerns demand may drop. Losses deepened after the quake forced Japanese carmakers to halt production.
Bridgestone Corp., the world‟s biggest tiremaker, restarted three plants in Tochigi, Japan, the company said on March 16.
„Trigger Demand‟
“Japan‟s rebuilding process probably will trigger demand for rubber, for vehicles that are deployed for reconstruction and also the automobiles coming back onto the roads,” Rajiv Budhraja, head of India‟s Automotive Tyre Manufacturers‟ Association, said March 16. The auto industries in China and India will also fuel demand for rubber, Budhraja said.
Natural-rubber demand in China, the biggest consumer, will rise 8 percent this year, lifted by record car-tire production, said Deng Yali, deputy head of the China Rubber Industry Association. 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, Deng said on March 16.
Passenger-vehicle sales surged 33 percent in 2010, as government stimulus measures and economic growth helped the nation remain the world‟s largest auto market for a second year.
Strong demand will come amid reduced output from the main Southeast Asian producers. Heavier-than-usual rain in Southeast Asia, which supplies 70 percent of the world‟s rubber, disrupted harvests over the past several months.
While farmers will increase supply by 9 percent this year, they won‟t eliminate shortages, as demand advances to its highest level since at least 2000, according to a team of Goldman analysts led by Tokyo-based Yuichiro Isayama.
(Bloomberg, March 18, 2011)