June 17 (Bloomberg) — Rubber supplies from key producing countries including Indonesia will probably remain low as “unfavorable” weather disrupts production, supporting prices, the Association of Natural Rubber Producing Countries said.

“Unfavorable weather will have a negative influence on supply” in June and July, Jom Jacob, senior economist at the association, said in an interview in Kuala Lumpur today. “The demand-and-supply situation will be favorable for prices to stay high” this year and next, he said, without giving an estimate.

Rubber futures in Tokyo have rallied about 10 percent from a five-month low on May 17 on optimism that economic expansion in Asia and record auto production in China, the biggest vehicle market, will drive demand for the commodity used in tires.

November-delivery rubber declined 3.6 percent to 275.3 yen a kilogram ($3,018 a metric ton) on the Tokyo Commodity Exchange today, snapping a five-day, 9.8 percent winning streak.

“The rubber price lately went down slightly, but I am confident that it will not go down too much,” Bernard Dompok, Malaysia’s Plantation Industries and Commodities Minister, said today. “If you look at the fundamental factors, there’s no change in supply and demand.”

The producers’ association will later this month revise down the supply forecast for its member countries, which represent 94 percent of global output. It projected in May that production may expand 6.2 percent this year to 9.37 million tons.

“June is supposed to be a dry month for Indonesia and India but the monsoon is going on there, disrupting tapping,” Jacob said.

Strong Demand

Supply next year will not see a significant improvement as some aging trees will be uprooted this year for replanting and new trees planted in 2005 will not be mature enough to generate high yields, said Jacob. Rubber trees take about seven years to mature and yields remain low until the 10th year.

“Demand in China, India and Malaysia remains strong,” Djoko Said Damardjati, the association’s secretary-general, said in the same interview. The three countries account for more than 45 percent of global consumption, according to the association.

Natural-rubber imports by China jumped 17 percent to 602,000 tons in January to April, from the same period last year. Demand for natural and compound rubber rose 26 percent to 1.05 million tons, the association said in its May newsletter. Consumption of natural rubber in India during the first four months rose 12 percent to 316,000 tons, it said.

China’s automobile output this year may grow by as much as 15 percent, expanding from a record to 15 million units, Gu Xianghua, deputy general secretary of the China Association of Automobile Manufacturers, said May 29.

Malaysian Output

The association represents Cambodia, China, India, Malaysia, Indonesia, Papua New Guinea, Philippines, Singapore, Sri Lanka, Thailand and Vietnam.

Natural-rubber output in Malaysia, the third-largest grower, may surge 17 percent this year as rising prices prompt farmers to increase tapping, offsetting crop damage from drought, the Malaysian Rubber Board said.

“Drought has had an impact on production but overall output will increase because of price,” Salmiah Ahmad, director general of the board, said in an interview today.

The nation’s production this year may climb to as much as 1 million tons, said Salmiah. That is more than the 900,000 tons forecast by the Plantation Industries and Commodities Ministry in May. Output last year was 856,189 tons.

Production is targeted to be about 1 million tons next year, rising to 1.8 million tons by 2020, Salmiah said. Exports will be maintained at the current level of about 1 million tons in the long term, she said.

Source: Bloomberg

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