Speculative trading has caused China’s natural rubber inventory to yo-yo, depriving rubber farmers and distributors across the globe of a yardstick for making decisions on their production and procurement activities. Such trading appears to be on the decline for now, but this is only accelerating the already rapid decline in stockpiles.
China’s rubber inventory increased from last autumn through the beginning of this year on expectations of growing domestic demand for car tires and other rubber products. Since then, however, importers and exporters have been reducing the volume of their procurements, as they are betting the commodity will continue to trade at low levels for some time to come.
Out of balance
Rubber produced by farmers in Thailand and Malaysia and imported to China by distributors is held at warehouses designated by the Shanghai Futures Exchange before being delivered to buyers. The volume of the inventory at these warehouses is a key gauge of the supply-demand balance in China, which consumes one-third of the world’s natural rubber.
In 2013, that inventory was around 100,000 tons in the January-September period, but it started surging in around October. The volume roughly doubled to about 200,000 tons in February. Imports from Thailand and other countries rapidly increased on hopes for a further rise in Chinese rubber consumption, said a sales representative at a Japanese rubber trading house. Ribbed Smoked Sheet (RSS) No. 3 listed on the Tokyo Commodity Exchange (Tocom) fell to the 220 yen ($2.13) level per kilogram in February, down from the 270 yen level logged at the end of last year. >> Read More