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Frbiz.com Reported Rubber Prices May Climb To 30-year High By March, Newedge Says
Rubber may gain to the highest level in three decades by March as the economic recovery
increases demand for the commodity used in tires and supply will decline, said a director at Newedge Group.Futures on the Tokyo Commodity Exchange, the benchmark for rubber prices, may top the 2008 peak of 356.9 yen per kilogram ($3,868 a metric ton), the highest level since March 1980, said Makoto Sugitani, senior director at the commodity derivatives division of Newedge Japan Inc. The company is a member of the Tokyo bourse, taking orders from overseas funds to trade on the exchange.
Rubber futures more than doubled in 2009, reversing the previous year's 56 percent loss. The Reuters/Jefferies CRB Index rose 23 percent last year, its best performance since 1979, as China led a recovery in demand for raw materials. Rising prices may benefit producers in Thailand, Indonesia and Malaysia and increase costs for tire makers such as Bridgestone Corp.
"Looking at the past trend, the market is set to extend a rally," Sugitani said in an interview in Tokyo yesterday. "It is likely prices will return to the 2008 high."
Rubber for June delivery, the most-active contract, gained 2.2 percent to 296.7 yen on the Tokyo Commodity Exchange at 10:29 a.m. local time. Prices earlier climbed to 297.2 yen, the highest level since September, 2008.
Foreign funds invest in Tokyo rubber contracts as the commodity is consumed and produced mostly in Asia, where the fastest regional economic growth in the world is fueling price gains, Sugitani said. Japan is Asia's second-largest consumer, while Thailand, Indonesia and Malaysia are the world's three biggest producers.
Declining Supplies
Supplies from producing countries will decline in coming months as the low-production season, or wintering, will start, Sugitani said. The seasonal factor may lead to a rally in prices this quarter, he added.
Rising car sales in China are also fueling a rally in rubber prices, he said. China's passenger-car sales surged by 98 percent to 1.04 million in November, the largest increase in at least five years, the China Association of Automobile Manufacturers said last month. China's full-year auto sales may be about 13 million, according to Booz & Co., which advises carmakers and investors in the country.
Rubber futures trading volume on the Tokyo Commodity Exchange, known as Tocom, fell 44 percent last year to 3.32 million lots, or 16.6 million tons, according to the bourse. Japanese individuals reduced participation under a law to curb aggressive soliciting of retail investors by brokers.
Overseas Investors
Still, overseas funds are unlikely to shift money away from Tokyo as the Shanghai Futures Exchange, the world's largest market for rubber futures, is closed to foreign participation, Sugitani said. Liquidity on the Singapore Commodity Exchange, which trades U.S. dollar-based rubber contracts, is lower than Tokyo, he added.
"Fund managers interested in rubber trading will continue to put money into the Tokyo market," Sugitani said. Overseas participants represented about 60 percent of rubber positions on Tocom at the end of November, according to exchange data, the highest rate among commodities listed on the bourse.
Tocom also trades gold, silver, platinum, palladium, aluminum, gasoline, kerosene and crude oil.
Newedge was formed as a 50-50 joint venture by French bank Societe Generale and Credit Agricole SA's Calyon investment- banking unit, according to the company's Web site.
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