Rubber Climbs to Near Record as China Ups Purchases

Rubber increased as a price decline on 6 February spurred investors to buy amid specula-tion China, the world’s largest user, may step up purchases after the New Year holiday to replenish stockpiles.

The July-delivery contract gained as much as 2.1 percent to 501.3 yen a kilogram ($6,090 a metric tonne) before trading at 499.3 yen on the Tokyo Commodity Exchange as of 11:57 a.m. The most-active contract had the biggest one-day drop since Jan. 26, retreating from a record 504 yen reached Feb. 4.

China will resume trade on 8 February after the weeklong holiday. Natural-rubber inventories monitored by the Shanghai Futures Exchange stood at 58,673 tonnes, 61 percent below last year’s peak of 151,832 tonnes, the bourse said Feb. 1.

Farmers reduce tapping during the so-called wintering period from February to May, when rubber trees shed leaves and latex production declines. Some plantation areas in northeast Thailand have already entered the low-output season, according to the Rubber Research Institute of Thailand.

Rubber users tend to increase stockpiles of raw material before the low-production period begins in major growing areas. Thai rubber production usually shrinks as much as 60 percent from peak levels, according to the Association of Natural Rubber Producing Countries.

La Nina

Rubber futures have gained 20 percent this year, extending last year’s 50 percent rally, as rising car sales led by China and India improved demand for tires. Supplies from Thailand, Indonesia and Malaysia, the top growers representing 70 percent of global supply, were curbed as a La Nina has led to higher- than-average rains in parts of Southeast Asia. The weather event started in June and usually lasts for nine months or more.

The Thai physical price remained at a record 184.05 baht ($5.97) per kilogram 6 February, supported by car sales and supply concerns, the Rubber Research Institute of Thailand said.

The Shanghai market is closed for the Lunar New Year holiday. May-delivery rubber in Shanghai climbed to a record 41,850 yuan ($6,350) a tonne on Jan. 31.

Natural-rubber consumption in China may rise 9 percent to 3.6 million tonnes this year, while rubber use in India may gain 5.2 percent to 991,000 tonnes, according to the Association of Natural Rubber Producing Countries.

Natural-rubber output in India, the fourth-biggest producer, gained 2.8 percent in the 10 months through January as favorable weather and record prices boosted production, the state-run Rubber Board said on 6 February.

Production totaled 749,950 metric tonnes in the April-January period, compared with 729,250 tonnes a year earlier, the board said in an e-mailed statement. Output was 98,800 tonnes last month, little changed from 97,500 tonnes a year earlier, it said.