Rubber Bulls Back as Exporters Cut Most Since 2009: Commodities
The biggest restrictions on rubber exports since 2009 and record consumption are sending prices back to a bull market after a five-month slump, increasing costs for Bridgestone Corp. (5108) and other tiremakers.
Thailand, Indonesia and Malaysia, accounting for 70 percent of global output, agreed to cut shipments by 300,000 metric tons, starting yesterday. That’s as much as China, the biggest user, imports in about five weeks and exceeds the 2013 supply surplus forecast by the International Rubber Study Group, which represents 35 nations. Tokyo-traded futures, a global benchmark, will advance 9.8 percent to 300 yen a kilogram ($3,841 a ton) by the end of the year, according to the median of 12 analyst estimates compiled by Bloomberg.
Producers are cutting sales to boost prices that tumbled 49 percent since reaching a record in February 2011 because of a supply glut and weaker economic growth. When they reduced cargoes in 2009, futures more than doubled that year. The latest curbs are coming as policy makers from the Federal Reserve to the European Central Bank pledge to buy more debt to bolster economies. The Singapore-based rubber group predicts record demand again in 2013.
“The bear market is over,” said Makoto Sugitani, the head of commodity derivatives sales at Newedge Japan Inc. in Tokyo who correctly predicted in September 2010 that prices would advance 20 percent within six months. “The easing has spurred fund flows into equities and commodities and export cuts by the three producers will support prices.”
After rallying 33 percent since mid-August on the Tokyo Commodity Exchange, futures are 3.7 percent higher for the year at 273.2 yen. The Standard & Poor’s GSCI Spot Index (MXWD) of 24 raw materials increased 3 percent since the start of January, and the MSCI All-Country World Index of equities advanced 11 percent. Treasuries returned 2.3 percent, a Bank of America Corp. index shows.
The three Southeast Asian producers will cut 180,000 tons of exports in the fourth quarter and 120,000 tons in the first three months of next year, their International Tripartite Council said Aug. 29. They will probably store the rubber until prices improve, said Yium Tavarolit, the chief secretary of the International Rubber Consortium Ltd., a unit of the council.
The countries also agreed to cut down aging trees across 100,000 hectares (247,000 acres) of plantations, an area about 50 percent greater than Singapore. The program, which will remove 150,000 tons of annual production, should start at the end of the harvest in February, said Yium.
Thailand, the biggest supplier, will spend 30 billion baht ($974 million) buying at least 300,000 tons from farmers at above-market rates to boost prices, Deputy Farm Minister Nattawut Saikuar said Sept. 13. That extends an existing plan that already acquired 100,000 tons for 15 billion baht, he said.
Production will rise 3.2 percent to 11.3 million tons this year, outpacing a 2.5 percent gain in demand to 11.2 million tons, according to the rubber study group. That values annual supply at about $40 billion. Output will expand 4.4 percent to 11.8 million tons in 2013, exceeding a 4.3 percent gain in consumption to 11.7 million tons, the group estimates.
While prices more than doubled from the end of 2008 through June 2011 as the Fed bought $2.3 trillion of debt in two bouts of so-called quantitative easing, the impact of the third round announced Sept. 13 may be more muted. Weakening global growth means central-bank stimulus probably won’t be a “game changer” for many commodities, Barclays Plc said in a report Sept. 25.
Stockpiling and limiting shipments will only diminish the glut temporarily, said Kazuhiko Saito, the chief analyst at Fujitomi Co., a brokerage in Tokyo. The planned export restrictions are smaller than the 690,000 tons removed in 2009.
While global tire demand is no longer weakening, it has yet to rebound, said Kaoru Tomizawa, a spokesman for Tokyo-based Bridgestone, the world’s biggest tiremaker. The company will use 980,000 tons of natural and synthetic rubber in the second half, below an earlier estimate of 1 million tons, he said. First-half consumption was 7 percent smaller than planned. About 80 percent of natural rubber goes into tires, says Deutsche Bank AG.
Truck sales fell 6 percent in the first eight months in China, which represents 34 percent of demand for natural rubber, data from the China Association of Automobile Manufacturers show. As much as 23 kilograms (51 pounds) of natural rubber is needed to make a tire for a medium to heavy commercial vehicle, according to CLSA Asia-Pacific Markets, a brokerage and investment group.
The sales slide will probably end next year, with Chinese truck purchases increasing 10 percent as policy makers add stimulus to bolster economic growth, said Zita Zigan, head of global commercial vehicle forecasting at LMC Automotive Ltd. in Oxford, England.
Global sales of light vehicles probably will grow 6.5 percent, from 5.2 percent in 2012, LMC Automotive estimates. As much as 1.6 kilograms of natural rubber is used in a passenger- car tire, according to Jeremie Capron, an analyst at CLSA in Singapore.
Production growth in Thailand likely will slow to 1.2 percent this year from 9.7 percent in 2011, the Association of Natural Rubber Producing Countries estimates. Output in Indonesia, the second-biggest, will climb 7.7 percent, from 11 percent, according to the Kuala Lumpur-based group, whose members represent about 93 percent of supply.
Stockpiles in warehouses monitored by the Tokyo Commodity Exchange fell to 3,441 short tons (3,122 metric tons) by Sept. 20, bourse data show. That’s the lowest in 13 months and 71 percent below this year’s peak of 11,886 tons on May 10.
“Rubber has bottomed out,” said Tetsu Emori, the Tokyo- based fund manager at Astmax Co., who helps manage about 35 billion yen of assets. “The uptrend is set to continue.”
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