Rubber Enters Bull Market as China Boosts DemandAya Takada
Rubber capped a two-month rally in Tokyo to enter a bull market as a weaker yen and signs that China’s economy is regaining strength boosted demand for the commodity used in tires.
Rubber for delivery in January advanced 2.8 percent to 277 yen a kilogram ($2,812 a metric ton) on the Tokyo Commodity Exchange, a 22 percent gain from this year’s lowest close for a most-active contract of 227.2 yen reached June 26. Futures fell into a bear market on April 1.
Rising prices may boost costs for Bridgestone Corp., Michelin & Cie. and Goodyear Tire & Rubber Co., the biggest tiremakers, and help farmers in Thailand after the economy in the largest producer nation entered a recession in the second quarter. Chinese manufacturing expanded this month after shrinking the most in almost a year in July, while output from European factories and services companies improved.
“Rubber resumed a rally as optimism grew that Europe’s economy may solidify its recovery and the Chinese growth may be accelerating, leading to an expansion in demand,” said Kazuhiko Saito, chief analyst at broker Fujitomi Co. in Tokyo.
China accounts for 33 percent of global demand and tires represent 70 percent of natural-rubber consumption in the country, according to estimates from the Qingdao International Rubber Exchange Market. China and Europe are the biggest consumers, according the International Rubber Study Group.
A preliminary purchasing managers index for China by HSBC Holdings Plc and Markit Economics rose to 50.1 from 47.7, exceeding all 16 estimates in a Bloomberg News survey. A reading above 50 indicates expansion.
Premier Li Keqiang rolled out measures to support growth fueled by domestic demand in the world’s second-biggest economy after a two-quarter slowdown.
Futures also drew support from the foreign exchange market as Japan’s currency traded near a three-week low against the dollar amid speculation the Federal Reserve will reduce bond buying as early as next month while Japan’s central bank will maintain unprecedented stimulus.
Declines in the yen, which has depreciated 5.4 percent against the dollar since rubber fell into a bear market, boost the appeal of futures denominated in Japanese currency.
Stockpiles monitored by the Tokyo bourse fell to 5,848 tons as of Aug. 10, the lowest level since Jan. 20. The volume fell 58 percent from this year’s peak of 14,079 tons.
Thai rubber farmers plan to hold a demonstration on Sept. 3 in Bangkok and some provincial areas to press the government to set minimum prices, Perk Lertwangpong, head of a rubber farmers’ group, said by phone today.
Thai rubber exports tumbled 32 percent in July from a year earlier to 169,581 tons, according to data from the Ministry of Commerce.
Rubber for delivery in January rose 2 percent to 20,700 yuan ($3,382) a ton on the Shanghai Futures Exchange. Thai rubber free-on-board added 1.2 percent to 83.95 baht ($2.63) a kilogram, according to the Rubber Research Institute of Thailand.