(Adds Chinese compound rubber imports eighth paragraph.)
By Thomas Kutty Abraham
March 22 (Bloomberg) -- The global natural rubber market has entered a “demand-driven bullish phase” as buyers led by China boost imports to meet rising tire demand, the Association of Natural Rubber Producing Countries said.
A target of 6 percent growth in world supply this year may not be met because of drought in major producing nations, the group, which represents countries accounting for 94 percent of global rubber production, said in a newsletter.
Rubber, used in tires and gloves, doubled in price last year as China overtook the U.S. as the world’s largest auto market, boosting vehicle sales by more than 40 percent. China is the world’s largest rubber consumer.
“The March scenario is very different from what was forecast earlier and there will be some negative impact on output because of the drought,” Jom Jacob, senior economist at the association, said in a phone interview from Kuala Lumpur today. “Demand is very high in major consuming nations.”
Rubber for August delivery gained as much as 1.5 percent to 289.8 yen per kilogram ($3,202 a metric ton) on the Tokyo Commodity Exchange before settling at 289.1 yen on March 19. The market is closed today for a holiday.
Expansion in output may be limited by “the severity of drought” in major producing countries, the association said. Production may gain to 9.54 million tons this year, according to a survey of member countries early this month, the association said. That compares with an International Rubber Study Group forecast last week of as much as 10.6 million tons.
‘Buoyant Demand’
“Preliminary estimates of imports and consumption in January and February for China, India and Malaysia are clear evidence of buoyant demand,” the association said. Chinese imports of natural rubber surged 63 percent in the first two months of this year, while Malaysia boosted imports by 34 percent, it said.
China’s compound rubber imports more than doubled to 127,000 tons in the first two months of this year, while natural rubber imports climbed to 267,000 tons, the association said.
“Large-scale capacity addition taking place in the Indian auto tire manufacturing industry indicates the possibility of a further acceleration in natural rubber demand in the country and more dependence on imports,” the association said.
Rising disposable incomes in the world’s second-fastest growing major economy may more than double car sales to 3 million annually by 2015, according to a 2006 forecast by the government. That has prompted Ford Motor Co., Volkswagen AG and other automakers to expand factories and introduce new vehicles in the country.
The association represents Cambodia, China, India, Indonesia, Malaysia, Papua New Guinea, Sri Lanka, Thailand and Vietnam.
(businessweek.com)
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