As the world is headed for a shortfall in production due to rains and floods in the rubber-growing region of Thailand and Indonesia, the commodity price gained with prospects of the biggest shortage since 2007 looming.
Tyremakers across the globe likely to raise their product prices because of rise in input cost. Bridgestone Corp., the largest tyremaker by sales, is raising European prices for the second time this year and Goodyear Tire & Rubber Co. is charging more as rubber gains on prospects for the biggest shortage since 2007.

“Drought earlier this year and heavy rains later on hampered tree-tapping across Asian plantations,” said Pongsak Kerdvongbundit, managing director of Phuket, Thailand-based Von Bundit Co., the largest natural-rubber producer and exporter in the world’s biggest supplier. “Global production will lag behind soaring demand for at least another two years.”

Stockpiles of the raw material, also used in gloves and condoms, will drop 12% to 67 days of demand next year, the lowest level in at least a decade, according to Goldman Sachs Group Inc. Consumption will outpace supply by 127,000 tonne, the most since 2007, the bank estimates. Futures in Singapore may jump 20% by March, said Makoto Sugitani, a senior director at Newedge Japan Inc., who correctly predicted the rally in January. That would mean a record $4.20 a kg.

Sales of rubber are increasing the most in six years, helped by what the International Monetary Fund says will be the fastest global economic growth since 2007. Rain and flooding in Thailand and Indonesia, the top producers, drenched farms and curbed harvesting. Michelin & Cie., the world’s second-biggest tyremaker, said in July that commodity costs would cut full-year earnings by as much as $850 million.

Inventories will drop almost 6% to 2.05 million tonne next year, for a third annual decline, Yuichiro Isayama and three other analysts at Goldman Sachs in Tokyo said in a report September 3. La Nina, a phenomenon linked to extreme weather, is likely to intensify at the end of the year, according to the Thai weather office. That may cause higher-than-normal rainfall in the south, which has 68% of the country’s plantations.

 

BLOOMBERG
Posted: Wednesday, Sep 22, 2010