Rubber will likely extend a bull market next year as monetary and fiscal stimulus from Japan to China and the U.S. will accelerate a global recovery and boost raw-material demand.
Futures in Tokyo, a global benchmark, will climb 14 percent to 344 yen a kilogram ($3,981 a metric ton) by March, according to the median estimate from seven analysts surveyed by Bloomberg, who correctly predicted in September that the price would climb to 300 yen by the end of 2012. The threshold was crossed yesterday for the first time since May.
Japanese Prime Minister Shinzo Abe, who won a landslide election victory last week, instructed his ministers to compile emergency economic measures early next month. His call for unlimited monetary easing and a 2 percent inflation target has sent the yen to a 28-month low against the dollar, helping exporters such as Toyota Motor Corp. boost sales overseas, leading to stronger demand for the commodity used in tires.
“Abe will likely do whatever he can to end Japan’s decade-long deflation and revive its economic expansion,” Takaki Shigemoto, an analyst at research company JSC Corp. in Tokyo, said by phone today. “Investors are betting on his scenario.”
After rallying 47 percent from this year’s low of 205.6 yen reached on Aug. 14, futures were 15 percent higher for the year at 302.5 yen at the settlement today, reversing last year’s 36 percent slump. The price is still 44 percent below a record high of 535.7 yen on Feb. 18, 2011.
The yen touched 86.64 per dollar, the weakest since Aug. 3, 2010, and traded at 86.43, extending this year’s loss to 12 percent. A weaker Japanese currency makes yen-based contracts cheaper for holders of other currencies.
JPMorgan revised its yen projection today, saying the currency will fall to 90 against the dollar in the second quarter next year. Nomura reduced its yen forecast to 90 per dollar for the second quarter from 85, citing Abe’s “aggressive” push toward a 2 percent inflation target.
The Federal Reserve said Dec. 12 it would buy $45 billion of Treasury securities a month from January, adding to $40 billion a month of existing mortgage-debt purchases. Data this month showed the world’s largest economy grew at a 3.1 percent annual rate last quarter, exceeding all projections in a Bloomberg survey. The International Monetary Fund expects a 3.6 percent global expansion in 2013, from 3.3 percent this year.
Rubber production is expected to decline as the so-called wintering season starts in February in Thailand, the world’s largest producer and exporter, slashing latex production. Output in Indonesia, the second-biggest grower, may drop for the first time in four years in 2013 as the country limits output and shipments in coordination with other producers.
Production may decline 8.9 percent to 2.77 million tons from an estimated 3.04 million tons this year, according to Agriculture Minister Suswono. That would be the first fall since 2009, when output dropped 11 percent to 2.44 million tons, data from Indonesia’s Directorate General of Estate Crops show.
Thailand, Indonesia and Malaysia, representing 67 percent of global supply, agreed in August to combat lower prices by limiting shipments and cutting down trees, paring 450,000 tons.
“Rubber will extend the rally, boosted by Japan’s stimulus measures, declining supplies during wintering seasons and export-cut measures,” Chaiwat Muenmee, analyst at DS Futures Co., said by phone from Bangkok.
Rubber will also draw support from better demand in China, the world’s largest consumer, as the nation’s economic growth is forecast to accelerate next year.
“As China’s economy has been on a recovery trajectory, demand from the auto sector will also recover,” said Naohiro Niimura, a partner at research company Market Risk Advisory.
China’s manufacturing may expand at a faster pace in December, according to a preliminary reading on Dec. 14 by HSBC Holdings Plc and Markit Economics, adding to signs the economy is strengthening as a new leadership takes power. The government has approved projects for the construction of about 2,000 kilometers (1,250 miles) of roads, subways in 18 cities and extra spending on railways.
Chinese monthly passenger-vehicle sales rose to the highest level in almost two years in November, beating analyst estimates, as consumer confidence improved with the economy and dealerships increased discounts to reduce stockpiles.
Wholesale deliveries, including multipurpose and sport-utility vehicles, gained 8.75 percent to 1.46 million units last month, according to the China Association of Automobile Manufacturers. Passenger car sales will increase about 10 percent next year, according to Xu Changming, director of information resource development at the State Information Center, part of the nation’s top economic planning body.