Benchmark Rubber prices in Tokyo have rallied 21 percent since the 2013 low in late June and were around 275.6 yen $2.84 per kilogram in Asian trade on Wednesday. The main contract on the Shanghai Futures Exchange has also rallied from its low in early July, gaining 21 percent to trade around 20,730 yuan $3,387 a tonne.
The worst may be over for Asian natural rubber prices as stronger economic growth in China and globally boosts demand for vehicle tires, but there are still risks to calling for a sustained price rally.
Rubber fell 21 percent to 238.9 yen on the Tokyo Commodity Exchange this year and is now 55 percent below the record 535.7 yen reached in February 2011. Lower prices should reduce costs for Bridgestone Corp., Michelin & Cie. and Goodyear Tire & Rubber Co., the biggest tiremakers.
The surplus will expand 57 percent to 490,000 metric tons this year, enough to meet U.S. demand for six months, according to RCMA Commodities Asia Group, the Singapore-based company that has traded rubber for nine decades. Futures in Tokyo, a global benchmark, will drop at least another 5.8 percent to 225 yen a kilogram ($2,369 a ton) by the end of December, according to the median of 16 analyst estimates compiled by Bloomberg. Five anticipate 200 yen, a price last seen in 2009.
March-delivery rubber rose 4.6 percent to end at 272.5 yen a kilogram ($3,490 a metric ton) on the Tokyo Commodity Exchange, the highest settlement for the most active contract since May 30. Futures have gained 2.7 percent this year.
Rubber jumped to a four-month high, erasing this year’s losses, after the world’s largest producers began cutting exports by the most since 2009, reducing supplies.
In 2008, during the financial crisis, the price of rubber lost 56%. Facing this situation, Thailand, Malaysia and Indonesia, representing about 70 percent of global natural-rubber supply, agreed to withdraw 690,000 tonnes from the market. Rubber price surged more than 100% the following year.
Rubber plunged 43 percent in the past year and reached its lowest level in almost three years as growth slowed in China, the top consumer, and Europe. At the Tokyo Stock Exchange Tuesday, January harvest was trading at 213,800 yen per tonne, the lowest price since October 2009. Same story at the Shanghai Stock Exchange, where January contracts were down to 21,150 yuan per tonne. Overall, rubber has lost nearly 27% of its value between March, its highest rate, and August.
So, after Indonesia indicated early July it was considering introducing a minimum price, Thailand, Indonesia and Malaysia today signed an agreement to reduce their rubber supply by 450,000 tons. Practically, 300,000 tons will not be exported this summer and 16,000 hectares of aging trees will be cut. If history repeats itself, this should give a major boost to rubber prices. Read the rest of Upward pressure on rubber price likely » » »
Indonesia, the world’s second-largest natural rubber producer, is considering introducing a minimum price under an agreement with other major Southeast Asian producers Thailand and Malaysia, to avert a further decline in the commodity’s price in the crisis-hit global markets.
The three countries, whose natural rubber production accounts for 70 per cent of global output, might jointly limit exports and set an export quota for natural rubber which fell 25% in four months on the Tokyo Commodity Exchange (TOCOM).
Rubber shortages are about to turn into a flood as China, the biggest consumer, grows at the slowest pace in three years, driving prices paid by Bridgestone Corp. and other tiremakers to the lowest since 2009.
Rubber fell 5.1 percent to 250 yen a kilogram on the Tokyo Commodity Exchange this year, 53 percent below the record 535.7 yen reached in February 2011. The Standard & Poor’s GSCI Index of 24 raw materials lost 9.9 percent since the start of January and the MSCI All-Country World Index of equities gained 2.6 percent. Treasuries returned 2 percent, a Bank of America Corp. index shows.
Rubber plunged to a four-month low as the political impasse in Greece increased speculation that the nation may leave the euro, deepening an economic slump in the region and weakening demand for the commodity used in tires.
The October-delivery contract slumped as much as 5.1 percent to 265 yen a kilogram ($3,317 a metric ton), the lowest level for a most-active price since Jan. 6, before settling at 270.1 yen on the Tokyo Commodity Exchange. A slump this month has trimmed rubber’s 2012 advance to 2.5 percent.
Futures will drop as much as 12 percent to 240 yen ($3.12) a kilogram (2.2 pounds) in Tokyo this year, the lowest since November 2009, the median estimate in a Bloomberg survey of 14 analysts and traders shows.
Rubber plantations from Indonesia to Ivory Coast will tap a global crop this year that will create the biggest glut since at least 2004, cutting costs for Bridgestone Corp., Michelin & Cie. and other tiremakers.