Rubber at 5yr low on Thai glut

Rubber tumbled to its lowest prices in five years amid an oversupply in Thailand, the largest producer, and rising stockpiles in China, the world’s largest user.

Prices dropped as much as 4.4% in Shanghai and 3% in Tokyo. Inventories monitored by the Shanghai Futures Exchange rose 1.6% to 166,328 metric tonnes on Sept 4, the highest in four months, bourse data show. Global production will outpace demand by 371,000 tonnes in 2014, the Singapore-based International Rubber Study Group said last month. Thailand started selling stockpiles while it also tries to reduce the glut by felling older trees.

"There is a surplus in the global market and demand is not catching up to the growth in supplies," Anu Pai, an analyst at Geojit Comtrade Ltd in Kochi, India, said Tuesday. "Chinese warehouse data last week showed that stockpiles are rising and there are concerns over demand from there. Moves by Thailand to offload state stockpiles have raised worries of oversupply."

Somnuek Choplook, from Hat Yai district in Songkhla, pours latex collected from the farm he works at into barrels. Rubber prices have hit a five-year low. (Bangkok Post photo)

Rubber for January delivery on the Shanghai Futures Exchange closed down 4% at 13,530 yuan a tonne, the weakest since March 2009. The February contract on the Tokyo Commodity Exchange dropped 2.9% to 191 yen a kilogramme, the lowest since July 2009. Prices this year have declined 25% in China and 30% in Japan.

Thailand will expand the area it will clear of aging trees by 33% to 400,000 rai a year in the season starting in October, Prasit Meadsen, acting director of the Office of the Rubber Replanting Aid Fund, said Sept 4. The program, to be implemented for seven years, will cut supply by 27,000 tonnes annually, he said.

The country meanwhile plans to unload all rubber it holds in state stockpiles, starting with 100,000 tonnes it already agreed to sell and a similar-sized shipment soon, Chanachai Plengsiriwat, managing director of Thailand's Rubber Estate Organization, said Sept 2.

The global surplus will narrow to 202,000 tonnes next year, according to an Aug. 13 e-mail from the International Rubber Study Group.

Inventories worldwide will reach 3.79 million tonnes by the end of 2014 and 4.33 million tonnes by 2015, according to The Rubber Economist Ltd. Reserves will increase to the equivalent of 3.9 months of consumption at the end of 2014 from 2.5 months a year earlier, the London-based independent researcher said by e-mail on Aug 15.

Manufacturing in China slowed in August for the first time in six months and property sales have weakened, raising concern the country may miss its 7.5% growth target this year.