China to buy 128,500 tonnes of rubber for state reserves

Chinas State Reserves Bureau is to buy 128,500 tonnes of rubber for its stockpiles, an industry report said, but market participants doubt the move by the worlds top consumer of the material will offer much support to prices near five-year lows.

The State Reserves Bureau has invited Yunnan State Farm, Hainan Rubber Group and Sinochem International to make offers on Dec. 9, according to a report by industry website Qinrex.cn.

Talk of the move may have helped benchmark Tokyo rubber prices hit limit-up on Monday, although they fell back after the release of weak Chinese trade data. The benchmark May contract ended 1.7 percent higher.

Shanghai May futures ended 2.57 percent lower.

Talk of possible stockpiling had been providing support to the market recently, said Quan Shuwen, senior analyst at Dongwu Futures. “But the problem is that international prices keep going down.”

That is likely to put pressure on the price the reserves will pay, she said, while the actual volume purchased could also be lower than the target.

Japanese rubber futures have fallen nearly 27 percent this year and are trading not far above five-year lows hit in October amid a supply glut deepened by Chinas slowing economy.

Hainan Rubber recently agreed to buy 208,000 tonnes of rubber from the stockpiles of top producer Thailand, which had been hanging over the market, but that did little to ease worries about the market glut.

“I expect the market to stay under pressure until the middle of next quarter, until we see some reduction in production due to the wintering,” said the trader.