Rubber Futures Decline as High Price Curbs Demand, Set for Weekly Gain

Rubber declined as end-users slowed purchases on higher prices, while heavy rains in Thailand continued to cut supply in the largest exporter, boosting the cash price to a record. Futures were still set for a weekly gain.

May-delivery rubber on the Tokyo Commodity Exchange declined as much as 0.7 percent to 369.1 yen per kilogram ($4,417 a metric ton) before settling at 370.4 yen. The price reached a 30-year high of 383 yen on Nov. 11.

End-users such as tire makers slow purchases as they draw down stockpiles, said Hisaaki Tasaka, an analyst at Tokyo-based broker ACE Koeki Co. “High prices sapped demand from physical buyers,” he said by phone today. “They will wait for prices to retreat.” Crude rubber stockpiles held at Japanese warehouses fell 2.3 percent to 7,375 tons on Nov. 20, data from the Rubber Trade Association of Japan showed yesterday.

The cash rubber price in Thailand climbed to a record, rising 1.5 percent to 134.05 baht ($4.46) per kilogram today, according to the Rubber Research Institute of Thailand. Demand remains strong amid a supply shortage as rains persist in southern Thailand, the institute said. Thailand’s south accounts for 80 percent of total production.

“Heavy rains in Thailand’s southern provinces raised worries over tightening supply,” Chaiwat Muenmee, analyst at DS Futures Co. said by phone from Bangkok. The monsoon covering southern Thailand may cause flash floods in the next two days, the Department of Disaster Prevention and Mitigation said today.

May-delivery rubber in Shanghai advanced 2.1 percent to close at 32,365 yuan ($4,858). The price reached a record 38,920 yuan on Nov. 11.

Supply Deficit

Global consumption of natural rubber will outpace supply by 313,000 tons this year, the most since 2006, Goldman Sachs Group Inc. forecast in a November report, revising its September outlook for an 82,000-ton deficit.

A natural-rubber shortage in India, the world’s biggest consumer after China, may widen almost five times over the next decade as rising incomes boost demand for tires, according to an industry group.

The deficit may widen to 840,000 tons in 2020 from 175,000 tons next year, Vinod Simon, president of the All India Rubber Industries Association, said in an interview. In 2015, the shortage may be 687,000 tons, Simon said.

The forecast underscores India’s rising demand for commodities as economic growth stokes consumer demand and the government boosts infrastructure spending. India’s “commodity demand has reached a tipping point, and growth is set to accelerate significantly,” Barclays Capital said last month.

Bridgestone Corp., the world’s largest tiremaker, expects to cut rubber use by 50 percent in the next decade to cope with rising raw material costs, Masayuki Ishii, general manager at the corporate communications division, said in an interview.

The company will use 1.77 million tons of natural and synthetic rubber for tire production this year, up 24 percent from 2009, he said.

(Source: http://www.bloomberg.com/news/2010-12-03/rubber-futures-decline-as-high-price-curbs-demand-set-for-weekly-gain.html)