Rubber in China on Edge of Bull Market as Exporters Curb Supply

Rubber in China ended Tuesday on the cusp of a bull market as shrinking inventories in the biggest consumer signal tightening supplies while top exporters curb shipments to bolster prices.

Rubber on the Shanghai Futures Exchange closed up 0.6 percent at 14,280 yuan ($2,301) a metric ton, below the level of 14,292 yuan that would signal a 20 percent advance from its recent low and meet a common definition of a bear market. Prices are still 67 percent below their peak in 2011.

Futures in December hit the weakest in almost six years as trees planted in Asia over the past decade 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. SHFE inventories last week slumped to an 18-month low.“Raw-material inventory levels at Chinese tire makers are very low at the moment,” said Tong Jingjing, an analyst at the Shanghai unit of Sri Trang Agro-Industry Pcl, Thailand’s largest listed rubber exporter. “End-users and some dealers who have oversold in the past few months are now scrambling to buy raw materials available on the market.”

Traders and analysts in China typically measure daily market moves using a commodity’s last traded price rather than an exchange’s official settlement price commonly used in Europe and the U.S. The SHFE contract for October ended Tuesday up 19.9 percent from its Dec. 11 low.

Rising prices may boost costs for companies including Bridgestone Corp. and Goodyear Tire & Rubber Co. and help farmers in producer countries including Thailand. The rally may extend to as high as 16,000 yuan, according to Tong.China ImportsInventories monitored by the SHFE slid 2.6 percent last week to 134,309 tons, the lowest since October 2013 and a sixth weekly decline, exchange data showed Friday.

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.

“As exporters moved together to boost prices, investors rushed to buy back the futures,” said Hideshi Matsunaga, an analyst at Sunward Trading Inc., a broker in Tokyo.

Thai and Indonesian rubber exporters this month agreed not to renew contracts with dealers who deliver supplies on the Singapore Exchange because prices are too low, according to Thai Rubber Association.

Rubber for October on the Tokyo Commodity Exchange rose 1.6 percent to 216.7 yen a kilogram. Free-on-board prices in Bangkok climbed 1.8 percent to 58.25 baht a kilogram.