Thursday, May 27, 2010

Good for Rubber Plantation companies:Rubber Advances as Crude Oil Rally, Low Supply Boost Appeal

By Jae Hur and Supunnabul Suwannakij

May 26 (Bloomberg) -- Rubber advanced as crude oil rebounded, improving the appeal of the commodity used to make tires, amid concerns of dwindling supplies in producing countries after the low-production season.

Futures in Tokyo rose as much as 2.8 percent as crude oil rose to more than $70 a barrel after a report showed a drop in gasoline stockpiles in the U.S. A gain in oil boosts the cost of synthetic rubber made from petroleum.

Rubber also climbed as “supplies from major producers have remained tight,” Takaki Shigemoto, analyst at research and investment company JSC Corp. in Tokyo, said today by phone.

Depleted supply from key producers after the low-production season will keep the market strong, the Association of Natural Rubber Producing Countries said in its May newsletter. Trees shed their leaves during the wintering season that runs from February to April, lowering latex output.

The October delivery contract climbed as much as 7.6 yen to 278.6 yen a kilogram ($3,092 a metric ton) on the Tokyo Commodity Exchange before settling at 275.9 yen. The new contract for November delivery settled at 273.7 yen after opening at 275 yen.

September-delivery rubber on the Shanghai Futures Exchange rose 1.8 percent to settle at 22,410 yuan ($3,280) a ton.

“The tight supply news helped boost rubber,” Chaiwat Muenmee, an analyst at broker DS Futures Co., said by phone from Bangkok. The shortage won’t last long “as more supplies are expected to come into the market next month,” he said.

Robust Demand

Ribbed smoked sheet RSS-3 grade rubber output may average 200 metric tons a day next month, compared with more than 100 tons a day in May, said Chaiwat.

Demand in China, India and Malaysia, which account for more than 45 percent of rubber consumption, should stay robust, said the association, which represents 94 percent of output.

Imports by China rose 17 percent to 602,000 tons in the January-April period and demand, including that for compound rubber, rose 26 percent to 1.05 million tons, according to the association. Consumption of natural rubber in India during the first four months rose 12 percent to 316,000 tons, it said.

Cash prices extended gains as a shortage of supplies prompted rubber processors to accelerate purchases, the Rubber Research Institute of Thailand said on its website today. Thai RSS-3 grade rubber for June delivery gained 0.2 percent today to 123.40 baht ($3.79) a kilogram, the institute said.

--Editors: Jarrett Banks, Jake Lloyd-Smith

To contact the reporters on this story: Jae Hur in Tokyo at Supunnabul Suwannakij in Bangkok at

To contact the editor responsible for this story: James Poole at

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