Rubber Reaches Two-Week High on Supply Cut, Chinese Purchases

By Aya Takada

March 18 (Bloomberg) -- Natural rubber futures climbed to the highest in more than two weeks after producers restated proposed supply cuts and on speculation China, the world’s largest consumer, is adding the commodity to state stockpiles.

Prices in Tokyo rose as much as 3.1 percent to the highest since Feb. 27. Thailand, Indonesia and Malaysia, the world’s three biggest exporters, may cut output by 10 percent this year, a Thai official said today. China’s State Reserve Bureau may buy as much as 80,000 tons in the domestic market, the head of the nation’s industry association said yesterday.

“The 10 percent reduction in supply will be large enough to support prices,” Takaki Shigemoto, an analyst at Tokyo- based commodity broker Okachi & Co., said today by phone. “Chinese buying is another support as the volume of planned purchases is larger than expected.”

Rubber for August delivery, the most-active contract, rose 1.4 percent to 140.9 yen a kilogram ($1,432 a metric ton) on the Tokyo Commodity Exchange at the 11 a.m. local time break.

Thailand, Indonesia and Malaysia agreed in December to reduce combined exports by about 700,000 tons this year.

Farmers in the three nations will cut down rubber trees and reduce output by 900,000 tons to take the global total to 8.12 to 8.15 million tons, Somchai Charnnarongkul, director- general of the Department of Agriculture of Thailand farm ministry, said today. Global output of natural rubber was around 9 million tons last year, he said.

Recent purchases by China’s State Reserve Bureau may reach 50,000 to 80,000 tons, Fan Rende, chairman of the China Rubber Industry Association, said in an interview in Guangzhou yesterday. That would be equivalent to 14 percent of the nation’s output last year.

“I heard previously that China had a plan to buy a total of 30,000 tons natural rubber for stockpiles in the three months to June 30,” Okachi’s Shigemoto said. “If China buys as much as 80,000 tons, that could be positive for prices.”

July-delivery rubber on the Shanghai Futures Exchange, the most-active contract, added 0.6 percent to 12,475 yuan ($1,825) a ton at 11:30 a.m. local time.

To contact the reporters on this story: Aya Takada in Tokyo atakada2@bloomberg.net;