BEIJING/SINGAPORE, Sept 3 (Reuters) – Shanghai rubber futures hit a fresh two-year high on Friday, and look set for further gains as both fundamentals and technicals are pointing higher, analysts said.
Rising Chinese auto output and sales — figures on Thursday showed August car sales rose by 59 percent on year — are fuelling ballooning prices. [ID:nTOE67N03X]
Unlike the property market, the focus of Beijing’s tightening policies, China’s car industry, the world’s biggest, is likely to continue to win official favour as it helps to boost tax revenue and employment.
That has drawn a flood of money into the rubber market. Open interest across Shanghai rubber futures has almost doubled since April to a record high above 450,000 lots in the past two weeks.
For a graphic showing prices and market open interest:
http://graphics.thomsonreuters.com/AS/0810/NT_20100309130124.jpg
“Shanghai rubber futures have more room to rise than to fall as both fundamentals and liquidity will support a rise,” said Guo Cheng, an analyst with Yong’an Futures, adding that prices could target 30,000 yuan tonne.
Fourth-month Shanghai rubber , the most active contract, hit 26,355 yuan per tonne, its highest since July 2008.
TOCOM rubber , down 1 yen on the day at 297.8 yen, continued to hold near August’s four-month high of 302 yen. In June 2008 the market hit an all-time high of 356.9 yen.
China is the top user of rubber globally but produces less than 10 percent of the world’s total, forcing it to import more than any other country. China’s July-October rubber season is seen yielding the same or slightly more this year than the 640,000 tonnes produced last year.
Although China’s economic recovery is widely expected to slow in the second half of this year, rubber consumption will stay strong on bullish car sales and low stocks.
“A large amount of rubber supply will be needed even to maintain the demand from (a slower auto industry recovery),” said Zhou Zhiqing, an analyst with Wanda Futures.
From a technical perspective, Shanghai rubber could rise to 32,000 yuan per tonne over the next three months, up 22 percent from current levels, and Tokyo rubber’s sixth month contract may hit 390 yen, according to Reuters analyst Wang Tao. [TECH/C-RUB]
For a graphic, click:
http://graphics.thomsonreuters.com/WT/20100309110921.jpg
Tokyo rubber has lagged Shanghai mainly due to gains in the yen, making the Japanese market less attractive for overseas buyers.
“Rubber will break through 300 sooner or later if the yen doesn’t rise on a large scale, driven up by China,” Guo said.
Analysts and traders said China’s 2010 annual natural rubber demand would rise at least 20 percent on strong car sales.
The association expects auto production and sales to exceed 16 million units in 2010, which would be an increase of 17.6 percent and the highest volume in history.
At the same time, rubber stocks at tyre producers and the Shanghai Futures Exchange are running low, while traders are building up their stocks in anticipation of higher prices.
Song Chao, an analyst with Tianma Futures, estimated rubber stocks at state farms in Yunnan and Hainan provinces, China’s main natural rubber producers, were slightly over 10,000 tonnes in total, versus 40,000-50,000 tonnes in normal years.
Although tyre output in the second half of 2010 is likely to be lower than in the first, a full year increase of at least 20 percent in tyre output can be achieved, a natural rubber importer in Shanghai said.
More support will come when Thailand, the biggest producer, hikes export taxes for natural rubber from Oct. 1.

Source: Reuters

Comments are closed.