Rubber Price May Jump 25% as Demand Increases in China

According to an article Friday in bloomberg.com by Aya Takada and Yasumasa Song, rubber may climb at least 25 percent to the highest level in three decades as demand increases in China, the largest consumer, outweighing concern European use will slow.

Futures may surpass the 2008 peak of 356.9 yen per kilogram ($3,922 a metric ton) on the Tokyo Commodity Exchange this year to reach the highest level since March 1980. Prices gained 3.6 percent this year after doubling in 2009 as the rally slowed on concern the sovereign debt crisis in Europe will stall the economic recovery, hurting demand for commodities.

Car ownership in China, the world’s largest auto market, will expand, boosting consumption of the raw material used in tires. China’s influence on the market and global economies is getting stronger and the demand from the country is setting the market’s direction.

Rubber for November delivery, the most active contract in Tokyo, gained 1.8 percent to 286.20 yen at 2:17 p.m. local time today. The price reached a five-month low of 250.9 yen on May 17, down from a peak of 338.5 yen about a month earlier. A price jump will benefit producers in Thailand, Indonesia and Malaysia, the biggest suppliers, and potentially boost costs for tire makers such as Bridgestone Corp.