Who Dares Bet That NR Prices Will Fall In 2Q11?

"The recovery in global auto car sales remains on track, with purchases in February posting a double digit gain for the second consecutive month. Russia is leading the way, with sales surging 80% year on year last month, and 77% year to date. Volumes have even started to improve in Western Europe, climbing 1% in February and reversing ten consecutive months of year on year decline," according to a March Global Auto Report by Scotiabank Group.

It added that the shutdown in Japan after the 11 March earthquake and subsequent tsunami have led to losses in vehicle production of about 14% of global vehicle output, and the major risks lie in the potential for auto parts shortages globally and its impact on the global supply chain as Japan is the world’s second largest auto parts exporter behind Germany, and hundreds of parts suppliers are located in northern Japan near the epicenter of the earthquake. Furthermore, the greatest risk remains in Asia, as nearly half of all Japanese auto parts shipments are destined to China and other Asian nations.

Auto sales in the U.S. – General Motors Co. (GM) said on Friday it sold 206,621 vehicles in March, up 11.4% from a year earlier on strong demand in the country despite U.S. gas prices jumped 25.1% last month. Meanwhile, Ford Motor Co. outsold General Motors Co. in March. It sold 212,777 cars and trucks, up 19.2% from a year earlier. Nevertheless, GM remained the dominant seller in 1Q11 with 592,545 vehicles sold compared with Ford’s 496,720 sales.

GM and Ford said the recovery of auto sales in the U.S. may continue in the face of Japan’s disaster, according to Bloomberg Newswires on 1 April. Global automakers may have lost production of 585,000 light vehicles in March including 550,000 in Japan, according to HIS Automotive Lexington, Massachusetts. Paul Ballew, chief economist for nationwide Mutual Insurance Co. in Columbus, Ohio said the issue in Japan should be temporary as there is enough slack capacity to make up for lost units.

Furthermore, GM continues to see U.S. auto sales rising to 13.5 million in 2011, including medium and heavy duty vehicles. Jenny Lin, Dearborn, Michigan based Ford’s senior U.S. economist said recently the Japan crisis should not derail the recovery in the U.S.

European car sales—European automakers benefited from government-backed scrapping incentives after the industry crisis hit Europe in late 2008. In 2011, automakers are looking to fast-growing markets like Chin and Brazil to offset sluggish sales closer to home. Spanish car sales fell for a ninth straight month, but new passenger car sales in France rose 6.1% in March, according to www.financialpost.com on 1 April.

Nissan Motor Co., the second-largest Japanese automaker, said on Friday that its auto sales still looked pretty good, at least where they were through May. The disruptions in Japan affect its sales to some extent, but it expects to get back soon.

J.D. Power & Associates said early March that auto sales in China would grow by 11.0% in 2011 after hitting 17.2 million last year, following growth rates of 33.0% in 2009 and 48.0% in 2008. In addition, the China Association of Automobile Manufacturers (CAAM) revealed that Chinese vehicle sales rose 4.6% year on year to 1.267 million units in February. Indian automobile industry also rose in March due mainly to a growing economy, increasing disposable incomes and low-interest rates in the country, according to www.smetimes.tradeindia.com.

The fall in the unemployment rate to 8.8% and the rise in payrolls to 216,000 workers in March in the U.S. are bringing back investor confidence. Stocks climbed on Wall Street on Friday 1 April. Manufacturing expanded, and companies stepped up hiring, earnings and hours stagnated, the U.S. Labor Department reported. The U.S. Federal Reserve meeting on 15 March pledged to continue its bond purchase program in order to promote the U.S. economic recovery while China still accelerated manufacturing for the first time in four months, and India grew for a twenty-fourth month, according a report by Bloomberg Newswires on 2 April.

Looking at natural disasters, the annual number of natural catastrophe events has clearly exhibited an upward trend since 1970, according to a recent analytical report by Thai Military Bank. Beyond any doubt, the data confirm that disasters worldwide have struck increasingly more and more each year. Since January 2010, we have seen major earthquakes in Chile, China, Haiti, and New Zealand and, most recently, Japan. Also floods, droughts and wildfires were rampant across the globe, from Australia to southern Thailand, it added. Economic losses during the past 10 years had incurred the largest losses including the current earthquake and tsunami in Japan, Hurricane Katrina, and the Chinese quake in 2008. It is evident that natural disasters partly cause supply shortages and push up commodity prices into new historical highs, such as sugar, palm oil, natural rubber etc last year as investors charge “asset return premiums” over risk-free returns.

The Movements of Global Stocks, Finance and Energy

Most Asian stock markets closed higher on Friday led by the Shanghai Composite Index, which climbed 1.3% to 2,967.41 on the back of a rise in Purchasing Managers Index (PMI) for March, while Japan's Nikkei Stock Average ended 0.5% lower at 9,708.39 as lingering worries over radioactive groundwater found just outside a troubled reactor building at the Fukushima Daiichi nuclear-power complex prompted investors to lock in recent gains. Elsewhere in the region, Australia's S&P/ASX 200 rose 0.5% to 4,861.80. Singapore's Straits Times index rose 0.5%, Indonesian shares added 0.8% and Thailand's SET tacked on 1.6%. Earlier in the day, New Zealand's NZX 50 added 0.4%.

European markets finished with strong gains on Friday, as most banks rallied after the results of Irish stress tests offered few surprises, while better-than-expected U.S. jobs data also lifted sentiment. The Stoxx Europe 600 index rose 1.5% to end at 280.02. The German DAX 30 index, largely supported by financials, pharmaceuticals and autos, gained 2% to 7,179.81, with shares of Deutsche Bank AG up 3.1%. Financials also lent support in Paris, where the CAC 40 index gained 1.6% to 4,054.76. In London, the FTSE 100 index gained 1.7% to end at 6,009.92.

The Dow Jones Industrial Average touched the highest level since the summer of 2008 on Friday due to stronger job creation in the U.S. than anticipated and the lowest unemployment rate of 8.8% in March. The DJIA rose for the second straight week and finished with an advance of 56.99 points, or 0.46%, at 12,376.72. The Standard & Poor's 500-stock index added 0.50% to 1,332.41, led by industrial and financial stocks. The Nasdaq Composite Index added 0.31% to 2,789.60. Those indexes also gained for the second straight week.

The dollar soared against the yen and Swiss franc but the euro after a stronger-than-expected U.S. jobs report lent credence to the story of an economy marching to recovery. The euro traded near a five-month high versus the dollar as the ECB interest rate outlook gained precedence over a downgrade of Portugal's government debt to near-junk status. Late Friday, the euro was at US$1.4233 from US$1.4158 late Thursday, according to EBS via CQG. The dollar was at Y84.04 from Y83.13, while the euro was at Y119.51 from Y117.70. The U.K. pound was at US$1.6120 from US$1.6035. The dollar was at CHF0.9244 from CHF0.9190.

Better-than-anticipated U.S. payrolls and a two-year low of 8.8% unemployment rate in March pushed up crude oil prices to fresh two and a half years highs on Friday. Light, sweet crude oil for May delivery on the New York Mercantile Exchange settled US$1.22 a barrel, or 1.1% higher at US$107.94 a barrel. That's the highest level since 25 Sept. 2008. Front-month May ICE North Sea Brent crude settled at US$118.70 a barrel, the highest price since 21 Aug. 2008, and up US$1.34 on the day.

The Rubber Market

The table below shows that rubber futures still wobbled during the week because speculators and funds still tied themselves to movements and impacts of oil and gold futures, exchange rates of the greenback against its rivals, bearish sentiments on the Middle-East violence and persistent radioactive leaks from nuclear plants in Japan, while disruption of NR supply in southern Thailand caused by heavy flooding since last weekend, persistent NR supply tightness in Malaysia and Indonesia and steady NR demand from tire and non-tire manufacturers worldwide except for Japan remained steady.

Description		1-Apr-11		25-Mar-11		Change		Unit
IRCo's DCP		524.28		528.44		-4.16		US cents/kg
TOCOM/RSS3 *
- Apr.		443.00		446.40		-3.40		Yen/kg
- Sep.		427.40		429.60		-2.20		Yen/kg
- Volume		19,227		17,982		1,245		Lots
SHFE/RSS3 **		34,890		35,740		-850	Yuan/ton
AFET/RSS3 ***
- May		171.20		172.00		-0.80		THB/kg
- Nov.		160.20		161.70		-1.50		THB/kg
- Volume		587		752		-165		Lots
SMR20 ****		530.00		530.00		-		US cents/kg
SIR20 ****		510.00		515.00		-5.00		US cents/kg
RRIT
- RSS3		173.50		175.25		-1.75		THB/kg
- STR20		161.35		160.10		1.25		THB/kg
- USS3		159.99		158.89		1.10		THB/kg
- Conc. Latex		107.85		107.60		0.25		THB/kg
- Field Latex		162.00		162.00		-		THB/kg
Source: IRCo

Notes: * Day sessions, the spot and benchmark months on 25 Mar. are Mar. and Aug.

** The most active months is Sep.

*** The spot and benchmark months on 25 Mar. are Apr. and Oct.

**** Offer, f.o.b. prices, Apr./May (25 Mar) and May/Jun. (1Apr.) deliveries

 

IRCo’s technical MACD and Signal Line continued recovering from a selling zone while its RSI also continued rising to 78.44% on Friday. As the rubber market remained wobbly during the week, it is expected that we will see a tug-of-war between rubber futures and cash prices in the coming week. Many southern provinces in Thailand are still under water that damaged thousands hectares of rubber plantations after heavy rains hit southern Thailand last week.

(Source: http://www.irco.biz/BlogMoreDetial.php?id=221&ShowContent=market_watch%20&PHPSESSID=a60b2b4a26bb8c769b3c0661769ec855)