Rubber prices are expected to climb as much as 19 percent by the end of next year as rising vehicle sales in China boosts demand, said Marubeni Corp, the largest Japanese trader of the commodity.
The cash price will probably trade between $1.80 and $2.30 per kg in the six months starting Jan 1 and range from $2 to $2.50 in the second half, said Roka Komiya, a trader at the rubber section of Tokyo-based Marubeni. The commodity currently trades at $2.10 per kg, and may retreat to as low as $1.50 later in 2009 before recovering, he said in an interview.
Futures in Tokyo have gained 46 percent this year as the global recession eases and demand rises from tiremakers including Bridgestone Corp and Michelin & Cie, the world's top two producers. The US, Germany and Japan have offered incentives to purchase new cars to save the automobile industry from the worst slump in decades. Vehicle sales in China, the biggest natural rubber consumer, rose 71 percent in July.
"Chinese demand will continue to increase as we can't see any negative factors," Kazutaka Sonomoto, manager at Marubeni's rubber section, said in the same interview in Tokyo on Tuesday. Car ownership in China will accelerate, he said.
February-delivery rubber traded at 198.8 yen per kg ($2,141 a ton) on the Tokyo Commodity Exchange at in afternoon trade. Prices reached 214.5 yen on Aug 31, the highest level for the most-active contract since Oct 8.
"Rubber prices fluctuate pretty widely and rising trends present difficulties," Bridgestone spokesman Kaoru Tomizawa said. The company uses short-term and longer-term hedging to control the effect of price changes, he said.
China's passenger-vehicle sales posted the biggest gain in July since January 2006, according to the China Association of Automobile Manufacturers. Tax cuts and government subsidies spurred demand in the country, which is set to surpass the US as the world's largest auto market this year.
Natural rubber demand in China is expected to rise by about 100,000 tons to 2 million tons this year, representing 20 percent of global consumption, Komiya said. Domestic production may be as much as 600,000 tons, he added.
The country will increasingly rely on imports to meet rising demand because of a shortage of suitable land to boost domestic output, according to Komiya.
Chinese buyers have refrained from buying rubber overseas since July as prices rallied and after they purchased in January, February, April and July, he said.
Rubber may retreat to as low as $1.50 by the end of the year, dragged down by other commodities, as prices slump after running ahead of an improvement in demand, Komiya said. The drop would spur buying from China, stemming further losses, he said.
Marubeni produces sheet and block rubber in two plants in Thailand, the world's largest exporter. The combined capacity at the plants is 100,000 tons a year.
"We want to have production facilities in other countries too," Sonomoto said. "Asia is the growth center for natural rubber, and we will increase the volume of trade in the area."