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Friday, June 18, 2010

China demand seen boosting 2010 rubber demand

INTERVIEW-UPDATE 1

* Global consumption 9.8 million t vs earlier forecast 9.7 million

* Output picking up this year on good prices

* China needs more rubber to feed auto industry

* Not yet convinced La Nina will follow El Nino

KUALA LUMPUR, June 17 - Chinese demand means natural rubber consumption is forecast to reach 9.8 million tonnes in 2010, up 4.4 percent from the previous year, even if global economic recovery is delayed, a top analyst said.

"There is more than a 50 percent chance of this model happening with the unfolding European debt crisis," International Rubber Study Group Secretary General Stephen Evans told Reuters in an interview on Thursday.

The new projection is still higher than an initial forecast of 9.71 million tonnes for 2010 consumption made in November, partly due to China's incentives to boost demand in its auto industry, the world's largest.

Traders have said China is back in the international markets after running down its domestic rubber inventories, prompting speculation it may be starting aggressive stockpiling.

Evans said China will be a major buyer of rubber, whether production grows or falters, as it has to feed the rapid growth in car sales.

CHINA TO KEEP BUYING

"They will have to carry on buying. Some in the Chinese car industry are saying the incentives will continue until year-end," he said.

The global auto sector swallows 70 percent of output annually and China has been sustaining demand with monthly double-digit percentage growth.

IRSG forecast global natural rubber output to rise 0.9 percent to 9.7 million tonnes this year from 2009, when there was a decline of 4.2 percent.

Evans said 2010 production growth was due to an increase in rubber tapping activities in top producers Thailand, Indonesia and Malaysia, in tandem with high prices of the commodity.

Rubber prices hit a record high of $4.10 a kg in April on lower supply in the first half of the year which was due to hot weather linked to the El Nino phenomenon, which intensified the wintering season for the trees and further sapped yields.

Benchmark physical Thai rubber prices were unchanged at $3.60 a kg on Thursday, just 12 percent off April's record.

Evans said he was "not yet convinced" that La Nina conditions, which can follow El Nino, will develop and bring more rainfall to disrupt rubber tapping.

"It is too early to say and rubber farmers are incentivised by the high prices to go out and tap as much as they can," he said.

But he said Indonesian industry officials had pointed to unseasonal rains recently as a start of La Nina weather conditions.

Malaysian and Thai rubber officials have said there is still no sign of La Nina developing, with dry weather persisting in some regions that has encouraged more tapping for the present.

source - http://news.alibaba.com