Rubber Advances to 16-Month High as Chinese Demand May Expand

By Aya Takada

Jan. 12 (Bloomberg) -- Rubber advanced to the highest level in 16 months as rising car sales in China, the world’s largest automobile consumer, stoked speculation that demand for the raw material used in tires will keep growing.

Futures in Tokyo gained as much as 3 percent to the highest level since Sept. 12, 2008. China supplanted the U.S. as the world’s largest auto market after its 2009 vehicle sales jumped 46 percent, ending more than a century of American dominance, data from the China Association of Automobile Manufacturers showed yesterday.

“Chinese rubber demand will keep growing as car sales in the country are forecast to rise further to around 15 million units this year,” Takaki Shigemoto, an analyst at research and investment company JSC Corp. in Tokyo, said today by phone. “Rubber producers may fail to catch up with rising demand.”

Rubber for June delivery rose as much as 8.7 yen to 300.4 yen a kilogram ($3,261 a metric ton) on the Tokyo Commodity Exchange before settling at 299.9 yen. Prices extended last week’s 5.7 percent rally, the biggest increase since the week ended Dec. 18. The market was closed yesterday for a public holiday.

China’s sales of passenger cars, buses and trucks rose to 13.6 million last year, the fastest pace in at least 10 years, according to the China Association of Automobile Manufacturers. In the U.S., sales slumped 21 percent to 10.4 million, the fewest since 1982, according to Autodata Corp.

China’s vehicle sales have surged since 1999 as economic growth averaging more than 9 percent a year has helped automakers including General Motors Co. and Volkswagen AG compensate for slumping demand in the U.S. and Europe. The market will likely remain the world’s largest, according to Booz & Co., which advises automakers.

Thai Shippers

Shippers in Thailand, the world’s largest exporter, have raised offers for RSS-3 grade rubber for February-March shipment to $3.05 a kilogram from $2.96-$3.00 on Jan. 8, Shigemoto said. The increase reflected a rally in the futures market, he added.

Rubber output from Thailand, the world’s largest producer, may increase as much as 5 percent this year, while exports remain level amid stronger competition, according to forecasts from the Thai Rubber Association.

Output is estimated at 3 million metric tons in 2010, Luckchai Kittipol, the association’s president, said in a Web site statement. Still, exports may be steady at about 2.7 million tons, Piyaporn Saelim, the association’s manager, said yesterday from the southern province of Songkhla.

Rubber for May delivery on the Shanghai Futures Exchange rose as much as 1.5 percent to 26,100 yuan ($3,823) a ton before settling at 25,890 yuan. The contract rose yesterday to 26,170 yuan, the highest level since July 2008.

Natural-rubber stockpiles monitored by the Shanghai exchange increased 1,785 tons to 146,333 tons, the bourse said Jan. 8. It was the highest level since November 2004.

Inventories may increase further as buyers in China tend to step up raw-material purchases before the new year holiday, Shigemoto at JSC said. China’s Lunar New Year break will start Feb. 14 and last for a week.

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