Rubber in Tokyo climbed to a 27- month high, while futures in Shanghai surged to a record, on optimism that economic growth in China, the largest consumer, will boost demand amid limited supply from top producers.

The most-active contract on the Tokyo Commodity Exchange gained as much as 2.2 percent to 342.4 yen per kilogram ($4,212 a metric ton), the highest level since July 2008, before settling at 338.7 yen. Rubber in Shanghai surged by the daily limit to as much as 31,795 yuan ($4,780) a ton.

China’s passenger-car sales to dealerships quickened in September as incentives prompted purchases, boosting the demand outlook for the commodity used in tires. The nation’s foreign- exchange reserves increased by a record to $2.65 trillion at the end of last month, while a 25 percent jump in exports lifted its trade surplus to $16.9 billion, reinforcing optimism that it will continue to lead the global recovery.

“The data from China showed the strength of the nation’s economy, boosting speculation their raw material demand will continue to expand,” Shuji Sugata, research manager at Mitsubishi Corp. Futures Ltd. in Tokyo, said today by phone.

“Strong demand is outpacing limited supply as rains across top producing countries have lowered output, while Chinese and Japanese buyers continue purchases to replenish stockpiles,” Sureerat Kunthongjun, an analyst at Agrow Enterprise Ltd., said by phone from Bangkok. Rubber processors also accelerate purchases ahead of the wintering season that starts February, he said. Rubber trees produce less latex during wintering.

China Inventories

Inventories in China climbed 5,320 tons to 36,900 tons, the Shanghai bourse said Oct. 8, based on a survey of 10 warehouses in Shanghai, Shandong, Yunnan, Hainan and Tianjin. That’s 76 percent lower than this year’s high of 151,832 tons on Jan. 21.

Rubber futures also gained on concern that output in China may be curbed because of wet weather in the nation’s southern island of Hainan, the main growing area, Sugata said.

Flooding forced the evacuation of 440,000 people and destroyed 3,000 houses, with more rain expected, Xinhua News Agency reported Oct. 12, citing Governor Luo Baoming. A total of 166,700 hectares (411,925 acres) of crops have been damaged, including 74,000 hectares destroyed, the news agency said.

Cash prices in Thailand gained 1.5 percent today to 118.55 baht ($3.97) per kilogram as heavy rains in the country limit supply and higher crude oil prices boost the appeal of the natural product, according to the Rubber Research Institute of Thailand.

Source: Bloomberg

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