Rubber stocks in bonded warehouses in Qingdao port have fallen about a tenth from a peak in May, partly on reduced demand for the commodity as a loan collateral after a fraud investigation at the port, industry sources said.
The drying up of rubber financing deals shows how a probe at Qingdao port, the world’s seventh busiest, into suspected fraud related to metal financing has had an impact on other commodities used in a similar fashion. China is the world’s top consumer of rubber.
Metals such as copper and zinc have been widely used for financing, a practice in which a commodity is pledged as collateral for a bank loan. But other commodities such as iron ore, soya beans and rubber have also been pulled into the trade, driving up stockpiles.
“After the investigation into metals, banks are more careful in granting financial support, so it’s not like before,” said a senior person involved in the rubber industry in Singapore. The source said banks were being more selective and possibly more conservative.
The market closely monitors rubber stocks in Qingdao, which account for the bulk of inventory in China, but are not disclosed publicly. Three dealers and analysts, who collect data from offices in Qingdao, estimated stocks of natural, synthetic and compound rubber slipped to 327,900 tonnes this week, from 362,200 tonnes in mid-May.
About 14 per cent of the stock holding is compound rubber which dealers say is mostly tied to financing deals. Compound rubber is made of natural and synthetic rubber and used in tyres. A drop in Qingdao stocks is usually positive for rubber prices as it implies stronger demand in a global market which is in its fourth year of oversupply.