Rubber output growth to beat estimate on Indonesian supplies

Natural rubber output in key growing countries may expand more than forecast last month as Indonesia, the second-largest producer, boosts supplies, according to the Association of Natural Rubber Producing Countries.

Output from member countries, representing 92 per cent of global supply, may climb 5.2 per cent to 9.96 million metric tonnes this year, more than the 4.9 per cent gain forecast last month, the group said in an e-mailed report. Supply increased three per cent in the April-June period, lower than the 5.8 per cent estimated last month, it said. Production last year was 9.47 million tonnes.

Rising supplies may accelerate a 35 per cent loss in rubber futures from a record ¥535.7 a kilogramme ($6,624) reached on February 18 and reduce costs for companies such as Bridgestone Corp, Michelin & Cie and Goodyear Tire & Rubber Co, the top three tire makers. Indonesia raised its output target to 2.95 million tonnes from 2.89 million tonnes last month, the group said.

“While the supply is likely to stay at low, the demand prospects are uncertain on account of the current global economic trends,” the Kuala Lumpur-based group said. “A possible correction in rubber price is likely to push supply’s growth further down due to farmers’ short-run response.”

December-delivery contract today gained 0.7 per cent to ¥347.3 a kilogramme on the Tokyo Commodity Exchange. Prices have gained about 23 per cent in the past year.

Rubber production is estimated to increase 2.1 per cent in July and 3.2 per cent in August, the group said. Output jumped 10.4 per cent in the first three months of 2011 from a year ago.

The production target of 9.96 million tonnes this year will be subject to “downward revision” as the Indonesian government’s target will be a “challenge” to achieve due to lower yields, the group said. Estimates from other countries have “not accounted the current unhealthy global economic trends and their potential implication on the natural rubber market during the rest of the year,” it said.

Exports from key producers may grow 3.1 per cent this year to 7.71 million tonnes, the group said. Imports by China and Malaysia may increase in the second quarter, while India may buy less overseas, it said.

Imports by China, the largest buyer, may gain 17.7 per cent in the April-June period from a year earlier because of the “abnormally low” base, the group said. China’s rubber imports are estimated at 230,000 tonnes in June and the government expects shipments to total 210,000 tonnes each in July and August, it said.

Imports of natural rubber by Malaysia in the second quarter may surge 11.7 per cent, while purchases by India may tumble 9.1 per cent, the group said.