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By Jae Hur
July 27 (Bloomberg) -- Rubber jumped to the highest in more than eight months on speculation global demand may exceed supplies as Indonesia, the world’s second-biggest producer, cuts its production target for the commodity used to make tires.
Indonesia reduced its output target for this year to 2.2 million metric tons from 2.5 million tons on lower prices and a drop in demand, Asril SutanAmir, the newly appointed chairman of the Indonesian Rubber Association, said July 23. Tokyo Rubber rose 5.1 percent last week, extending its gain for a third week.
“Thai offer prices have risen recently,” Takaki Shigemoto, an analyst at Okachi & Co., said. The market has been concerned that any reduction in supply by Indonesia may drive its major buyer, China, to source rubber from Thailand, the world’s top producer, he said.
December-delivery natural rubber, the most-active contract, gained as much as 3.3 percent to 185.9 yen a kilogram ($1,961 a ton), the highest since Nov. 10, on the Tokyo Commodity Exchange. The contract was at 185.3 yen by 12:01 p.m. Tokyo time. Prices have risen for three straight weeks.
Shippers in Thailand increased offers for RSS-3 grade rubber for September shipment to $1.87 a kilogram this morning from $1.75 earlier a week earlier, according to Shigemoto.
There’s been concern that the El Nino weather pattern in Asia Pacific, including in some rubber producing countries, may affect production of agricultural commodities, Shigemoto said.
El Nino, which can cause drought in Australia and the Asia Pacific, continues to develop in the Pacific Basin, Australia’s Bureau of Meteorology said July 22.
Indonesia’s output revision last week came amid a supply reduction by three major producers and a jump in car sales in China, Shigemoto said.
Lower Exports
Thailand, Indonesia and Malaysia will cut shipments by as much as 48,000 tons a month in the second half, said Abdul Rasip Latiff, chief executive officer of the International Rubber Consortium Ltd. The trio reduced exports by 540,000 tons in the first five months of the year, more than the 414,000 ton reduction planned for the first half, he said on July 15.
China’s sales of cars, sport-utility vehicles and other passenger vehicles surged 48 percent to 872,900 last month, the China Association of Automobile Manufacturers said July 9. That helped to make the Asian nation the world’s largest auto market this year, with 27 percent more first-half sales than the U.S.
Rubber for January delivery on the Shanghai Futures Exchange, the most-active contract, added 0.9 percent to 17,855 yuan ($2,614) a ton by 11:03 a.m. local time.
To contact the reporter on this story: Jae Hur in Singapore at jhur1@bloomberg.net
