Rubber in China Enters Bull Market as Exporters Restrict Supply

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Rubber in Shanghai entered a bull market as exporters attempt to restrict shipments to bolster prices, raising speculation a global surplus is shrinking.

Rubber for delivery in September advanced 2.9 percent to end at 14,470 yuan ($2,333) a metric ton on the Shanghai Futures Exchange, more than 20 percent above the Dec. 11 close of 11,910 yuan, meeting the common definition of a bull market.

Futures in December hit the weakest in almost six years as trees planted in the past decade in Asia matured and flooded the market just as China’s economy slowed. Producers including Thailand, the biggest exporter, are seeking to stem the loss by restricting shipments and reducing growing areas. Stockpiles monitored by the SHFE slumped to an 18-month low last week.

“Supply may decrease as exporters from Thailand to Indonesia are withholding delivery because of low prices,” said Kazuhiko Saito, an analyst at Fujitomi Co., a broker in Tokyo.

Five Thai and seven Indonesian exporters have agreed not to renew contracts with dealers who deliver rubber on the Singapore Exchange because prices are too low, according to Chaiyos Sincharoenkul, the president of the Thai Rubber Association. Futures in Singapore have lost 12 percent in the past year.

Goodyear, Bridgestone

Rising prices may boost costs for companies including Bridgestone Corp. and Goodyear Tire & Rubber Co. and help farmers in producer countries from Thailand to Vietnam.

Inventories monitored by the Shanghai exchange rose 0.6 percent this week to 135,080 tons, climbing from the lowest since October 2013 and snapping a six-week decline, exchange data showed Thursday.

China’s rubber imports rose 24 percent to 220,444 tons in March from the previous month, rebounding from declines in January and February, customs data show.

“Chinese investors rushed to buy as rubber looked oversold compared with other industrial commodities, and as delivery restriction by exporters may create a shortage,” said Gu Jiong, an analyst at Yutaka Shoji Co., a broker in Tokyo.

Rubber on the Tokyo Commodity Exchange, which entered a bull market in December, rose 0.9 percent to close at 218.6 yen a kilogram ($1,837 a ton), the highest since March 4. Free-on-board prices in Bangkok climbed 1.2 percent to 58.95 baht ($1.79) a kilogram, the highest level since March 6.

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