Rubber futures in Tokyo fell into a bear market as stockpiles in China swelled to a nine-year high, signaling weakening demand from the largest consumer of the commodity used in tires.
Rubber for delivery in June on the Tokyo Commodity Exchange fell 1.1 percent to end at 226.7 yen a kilogram ($2,208 a metric ton). Futures dropped 21 percent from a closing high of 286 yen reached on Sept. 9, meeting the common definition of a bear market.
That marks the end of bull run that started on Aug. 26 and stalled as stockpiles in China climbed to the largest amount since 2004 while the government in Thailand this month forecast higher output from the biggest producing nation. The Rubber Economist Ltd., a London-based industry adviser, projects a global glut to expand this year.
“Concerns are growing that a slowdown in China’s industrial production is weakening demand,” said Takaki Shigemoto, an analyst at Tokyo-based JSC Corp. “Chinese buying may not pick up.”
Expansion in the world’s second largest economy, which uses about a third of all rubber, will slow to 7.5 percent this year and 7.3 percent in 2015, from 7.7 percent in 2013, the International Monetary Fund forecasts.
Rubber in Tokyo, the international benchmark, slumped 17 percent this year while futures in China lost 14 percent. Stockpiles monitored by the Shanghai Futures Exchange climbed for eight straight weeks to 204,451 tons, bourse data showed last week. The contract for May delivery on the Shanghai bourse traded at 15,605 yuan ($2,580) at 2:48 p.m. local time, the lowest level for a most-active contract since July 2009.
Surplus Forecast
Rubber production in Thailand may rise 4.3 percent to 4 million tons in 2014, a fourth annual advance as farmers increase in acreage, the Office of Agricultural Economics said on Jan. 9
A global surplus may climb to 366,000 tons in 2014 from 336,000 tons in 2013, Prachaya Jumpasut, managing director of The Rubber Economist, said last month.
Political protests in Thailand are a risk that may curb production, according to Von Bundit Co.
Output in the nation in January and February may drop as much as 20 percent from a monthly average of 300,000 metric tons to 350,000 tons as growers from the main producing region join protests seeking to overthrow the government, Bundit Kerdvongbundit, vice president of the country’s second-largest producer, said last week.
China represented 35 percent of global demand, consuming 3.9 million tons in 2012, according to the International Rubber Study Group.
Tires represent 70 percent of natural-rubber consumption in China, the Qingdao International Rubber Exchange Market estimates.
Source: Bloomberg
Published: 28 Jan 2014