Rubber Heads For Bear Market As China’s Inventory Rises

Rabu, 29 Januari 2014 | 11:03

Rubber futures in Tokyo headed toward a bear market as stockpiles in China swelled to a nine-year high, signaling weakening demand from the largest consumer of the commodity used in tires. Rubber for delivery in June on the Tokyo Commodity Exchange fell as much as 1.2 percent to 226.5 yen a kilogram ($2,207 a metric ton) before trading at 227.3 yen at 9:13 a.m. local time. A close at or below 228.8 yen would be 20 percent decline from the Sept. 9 settlement for a most-active contract, meeting the common definition of a bear market.

That would mark the end of bull run that started on Aug. 26 and stalled as stockpiles monitored by the Shanghai Futures Exchange climbed, advancing for eight straight weeks to 204,451 tons, the largest amount since October 2004. Rubber production in Thailand, the world’s biggest producer and exporter, will probably increase for a fourth year in 2014 because of an increase in acreage, according to the Office of Agricultural Economics.

“Concerns are growing that slowdown in China’s industrial production is weakening demand for the commodity,” said Takaki Shigemoto, an analyst at Tokyo-based research company JSC Corp. “As rubber stored in Chinese warehouses is huge, and China’s economic outlook looks cloudy, Chinese buying may not pick up.”

Rubber in Tokyo, the international benchmark, slumped 17 percent this year while futures in China lost 12 percent. The contract for May delivery on the Shanghai bourse is trading at the lowest level for a most-active contract since July 2009.

Output in Thailand may rise 4.3 percent to 4 million tons from last year, the Bangkok-based office said Jan. 9.

by Bloomberg