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Saturday, June 26, 2010

Rubber Has Second Weekly Gain on Supply Concern, Tire Sales

By Aya Takada

June 25 (Bloomberg) -- Rubber climbed for a third day on speculation that rainfall will disrupt output in Thailand, the world’s largest producer, making it difficult for suppliers to meet growing demand from tire makers.

Futures in Tokyo gained as much as 1.5 percent, nearing a one-week high reached yesterday. The price climbed 3.8 percent this week, booking the second weekly increase.

Bridgestone Corp., the largest tiremaker, raised its first- half net income forecast by 37 percent yesterday, citing higher sales and overseas prices. The monsoon covering the Andaman Sea and the Gulf of Thailand is causing heavy rains in many parts of the country, according to the Thai Meteorological Department.

“Futures were supported by a strong cash price amid speculation rain may keep disrupting tapping in Thailand,” Kazuhiko Saito, an analyst at commodity broker Fujitomi Co. in Tokyo, said today by phone. “A bullish earnings outlook by Bridgestone was also positive to the market.”

November-delivery rubber gained as much as 4.3 yen to 285.2 yen per kilogram ($3,184 a metric ton) before settling at 284.7 yen on the Tokyo Commodity Exchange. The December-delivery contract, which was listed on the bourse today, settled at 278.6 yen after opening at 279 yen.

Bridgestone said yesterday net income in the six months ending June may be 37 billion yen ($413 million), compared with a previous projection of 27 billion yen. The company attributed the revision to increased tire sales and improvement in product prices in overseas markets.

Strong Demand

“Given the outlook, tire demand may remain strong for the rest of this year,” Saito said.

China, the world’s largest auto market, is the biggest user of natural rubber. The nation may increase gross imports of the raw material to 1.68 million tons this year, from 1.59 million in 2009, according to a May report from the Association of Natural Rubber Producing Countries.

Rubber prices may climb 26 percent next year as supplies lag behind demand, according to Royal Bank of Scotland Asia Securities (Singapore) Pte.

Natural rubber may average $4,500 a ton next year, up from $3,580 a ton year-to-date, as “heavy rainfall in southern Thailand has disrupted supply” and “inventory levels in China are worse than we expected,” Nirgunan Tiruchelvam, a commodities analyst at the bank, said in an e-mailed report.

The benchmark price in Thailand advanced 0.8 percent to 118.85 baht ($3.67) a kilogram, supported by limited supply and growing auto demand in many countries, the Rubber Institute of Thailand said on its website today.

November-delivery rubber on the Shanghai Futures Exchange added 0.4 percent to 21,890 yuan ($3,222) a ton at 3:00 p.m. local time.

source - http://www.businessweek.com