Globle rubber industry hopes China demand will offset Europe woes

SINGAPORE, (Reuters): China’s strong appetite for rubber could help the market stave off pressure from a worsening debt crisis in Europe that threatens commodities demand while Thailand’s move to prop up prices will aid the tyre industry, industry officials said.
Policymakers, traders and industry officials gathering at the World Rubber Summit 2012 in Singapore this week will focus on global demand outlook and key issues such as weather-related supply disruptions and macroeconomic changes.
“I think the biggest issue in the market is the European sovereign debt problem, because it’s going to relate to prices of commodities, including rubber. It can be contagious and it could be dangerous,” said a dealer in Kuala Lumpur.

The financial turmoil in Europe has driven down tyre grades more than 40 per cent to $3.80 kg from a record $6.40 in February 2011, with benchmark rubber futures on the Tokyo Commodity Exchange hitting multi-month lows.
“The demand for rubber is always there,” the Kuala Lumpur dealer added. “Demand for cars in China is improving, but since the price has come down, a lot of people are buying hand to mouth. They are not in a hurry to buy.”
China is forecast to consume 3.61 million tonnes of natural rubber in 2012, up 3 per cent from 3.5 million last year, the Association of Natural Rubber Producing Countries says.
China car sales
The country takes 35 per cent of rubber, making it the world’s largest user of the commodity. Car sales rose 12.5 per cent in April from a year earlier, more than double the modest pace of March as consumers trickled back to the showrooms ahead of the Labour Day holiday.
The tyre making industry consumes 60 per cent of world rubber. Rubber is also used for gloves, condoms and products in the transport, construction, health and mining industries.
“We would like to find out the actual supply and demand situation in China, and also how aggressive Thailand is in implementing the rubber purchasing programme,” said Ker Chung Yang, an investment analyst at Phillip Futures in Singapore.
“Global supply and demand outlook is also one thing that we need to find out from the conference.”
Global demand for rubber will reach 26.8 million tonnes this year, an increase of 4.3 per cent from 25.7 million last year, the International Rubber Study Group, organiser of the Singapore event, forecast in March.
In a rare move, the Thai Rubber Association said on Monday the country planned to import rubber sheets from TOCOM to honour overseas contracts after unseasonal rains reduced supplies, lifting futures off their four-month lows.
The imports followed a 15 billion baht ($479 million) government intervention scheme launched in January after a drop in the price of raw material to below 100 baht a kg ($3.19) sparked protests from farmers.
The two-day Singapore meet will also weigh demand for synthetic rubber, but the bleak global economic scenario and the progress of Thailand’s intervention will take centre stage, particularly after Tokyo futures jumped more than 3 per cent on Monday, when Thailand announced its plan to buy rubber.
“Technically, if you want to push the market, buying nearby from the Tokyo exchange and then taking delivery is by far the most efficient way to do it,” said a dealer in Singapore.
“Attempting to push up the price of rubber by buying raw material or finished goods at origin, you need awfully deep pockets.”
Thailand, Indonesia and Malaysia produce 70 per cent of the world’s natural rubber. The main tyre grades are Thai Ribbed Smoked Sheet or RSS3, Standard Thailand Rubber or STR20, Indonesia’s SIR20 and Malaysia’s SMR20. ($1=31.27 baht)