Rubber sank to its lowest level in more than five years amid speculation that calls to restrain supplies from the world’s two biggest producers wouldn’t be enough to offset slowing demand.
An industry group in Thailand asked members not to sell below $1,500 a metric ton, about the level now on the Singapore Exchange. The government also put on hold a stockpile disposal, whileIndonesia urged producers to refrain from hasty sales as the market heads for a fifth year of glut. Suppliers should weigh whether to purchase futures, said Masayo Kondo, president of Commodity Intelligence Ltd., a research company in Tokyo.
“Thailand needs to take additional measures to stem the price decline,” said Kondo. “The government should consider seriously buying futures as it costs less than buying physical rubber. Fundamentals alone cannot explain this rapid fall.”
Futures in Tokyo plunged 36 percent this year as economies slowed in Europe and China, the top consumer, weakening demand. Italy cut its growth forecast yesterday, German manufacturing shrank and euro-area factories lowered prices in September by the most in more than a year. China’s manufacturing stayed subdued last month as an official gauge was unchanged.
Prices on the Tokyo Commodity Exchange dropped as much as 1.4 percent today to 174 yen a kilogram ($1,604 a ton), the lowest since July 2009, while futures in Singapore were little changed at $1,499 a ton. Other producers may profit from today’s moves by Thailand and Indonesia, saidKazuhiko Saito, chief analyst at Fujitomi Co., a broker in Tokyo.
“The measures aren’t enough to bolster prices, as Vietnam and other exporters may take advantage of them to boost their own shipments,” said Saito. “Coordinated actions by all the major exporters are needed as investors are increasingly concerned that a global economic slowdown will weaken demand.”
While the global market is in surplus, the oversupply is shrinking, according to The Rubber Economist, a London-based adviser. Supply will exceed demand by 43,000 tons in 2015 and trail consumption by 77,000 tons in 2016, it said last month.
Price declines are limited by the Thai and Indonesian efforts to shore up the market and because farmers will tap less latex amid low prices, said Korakod Kittipol, marketing manager at Thai Hua Rubber Pcl, a producer and exporter. The low for futures will be 170 yen, he said by phone from Bangkok.
Now Thailand has put on hold the sale of 200,000 tons from state inventories, the government is examining the quality and quantity of inventories and reviewing strategies to ensure the raw material is sold at a “reasonable” price, Petipong Puengbun Na Ayudhya, the agriculture minister, said in an interview yesterday in Bangkok.
Futures are nearing the bottom of a bear market that started in January and are set to climb to 205 yen by the end of the year, according to the median of estimates from 15 analysts compiled by Bloomberg and published on Sept. 16.