Natural rubber will probably climb as dry weather cuts production in Southeast Asia, the main growing region, and consumption increases, said the International Rubber Consortium Ltd.
Output in Thailand, Indonesia and Malaysia is set to drop by 6 percent to 8 percent this year because of an “exceptional dry season” during the low-production cycle, the consortium said in a statement on March 14. The three countries represent about 70 percent of global supply. Demand may expand, driven by economic growth in major importers, it said.
Futures in Tokyo surged 12 percent from an 18-month low on Feb. 6 amid speculation that drought will cut supplies. Reserves in the three countries are low and may drop further as wintering is expected to be severe, the consortium said last month, referring to the period from February to May. A possible El Nino may bring more dry weather, hurting yields, it said last week.
The “exceptional dry season, coupled with severe wintering that is expected to be prolonged, will delay the new tapping season,” said IRCo. “The price is expected to be strengthened in the coming months.”
Rubber traded at 236 yen a kilogram ($2,325 a metric ton) on the Tokyo Commodity Exchange today. Futures entered a bear market in January and dropped 9.3 percent last year on concern that growth in China, the top consumer, would slow.
Areas in southern Thailand, the biggest producer and exporter, experienced a rain deficit in the past 90 days, said Joel Widenor, the director of agricultural services at the Bethesda, Maryland-based Commodity Weather Group. A bigger concern would be lack of rain heading into the wet season, he said in an e-mail March 14.
Rain Deficit
“We expect that rains will most likely stay below average during April and May, causing rain deficits to build for the start of the rainy season,” said Widenor, responding to questions from Bloomberg.
IRCo asked trade members last month to refrain from selling at low prices. Vietnam, the fourth-biggest exporter, supports the move and plans to cut output, the country’s rubber association said in a letter dated Feb. 20. IRCo is the operating arm of the International Tripartite Rubber Council, which represents government officials, growers and exporters in Thailand, Indonesia and Malaysia.
The high global natural rubber inventories reported by various sources have been inconsistent and may have been incorrectly reported, said IRCo. The council will work with the Association of Natural Rubber Producing Countries to address statistical discrepancies, said the consortium. ANRPC says it is a group of growers representing 93 percent of supply.
Source: Bloomberg
Published: 17 Mar 2014