By Meggan Richard and Anuchit Nguyen Bloomberg News
MONDAY, DECEMBER 12, 2005


HAT YAI, Thailand Rubber prices may rise to the highest in 21 years as violence in Thailand prevents the world's biggest supplier from meeting Chinese demand.

Plantation owners in Thailand, which supplies 38 percent of the world's rubber, are being hampered by fighting between Muslim activists and the police in the southern part of the country. Production, already hampered by heavy rains, may fall further because a curfew and fear of attacks are reducing the time workers spend tapping rubber trees.

"It looks like rubber output in the major producing regions will decline," Hiroshi Munakata, a Tokyo-based commodities analyst with the brokerage firm Asahi Trust, said in an interview. "Political instability and unfavorable weather will have a significant effect."

Output of manufactured rubber in southern Thailand fell 4 percent in October from a year earlier to 69,000 tons, according to the central bank. National production this year may fall short of the three million tons posted in 2004, said Saelim Piyaporn, manager of the Thai Rubber Association. A decline this year would be the first since 1996.

Natural rubber on the Tokyo Commodities Exchange, the world's largest futures market for the material, may increase 4 percent to ¥230, or $1.91, a kilogram in 2006, according to traders and analysts.

Chinese automakers are increasing output by about 15 percent and their demand for rubber is rising. Rubber supplies have plunged 78 percent this year in warehouses monitored by the Shanghai Stock Exchange.

Commodities from copper to crude oil are surging because of orders from China. Prices for copper, oil and iron ore rose to records this year, helping lift the Total Return index of the Goldman Sachs Commodity index 22 percent in the first 11 months, compared with a 3 percent gain by the Standard and Poor's 500 index.

Tokyo rubber futures are up 69 percent this year. Natural rubber prices ended trading at ¥221.6 a kilogram on Friday, the highest closing price in 17 years. Forecasts for next year's high in the Bloomberg survey ranged from ¥190 to ¥250.

U.S. Gulf spot prices for butadiene, an oil product used to make synthetic rubber, have climbed 34 percent to 49 cents a pound this year, according to data compiled by Bloomberg.

The tire industry is the biggest consumer of rubber. The higher prices for synthetic material have prompted some buyers to switch to natural rubber, which accounts for about 42 percent of the market, from 39 percent three years ago, according to the International Rubber Study Group.

"Rubber prices will stay at high levels and may hit records next year," Lin Hui, a commodity analyst at China International Futures (Shanghai), said Dec. 1.

Higher prices are prompting the tiremakers Bridgestone, Michelin and Goodyear Tire & Rubber to charge more for their products.

Michelin said rising raw material costs could hurt earnings in 2006. The company this year has raised North American prices for truck tires by as much as 11 percent and for car tires by as much as 14 percent.

Bridgestone, the world's largest tiremaker by sales, said last month that higher costs of rubber and other materials could trim more than ¥80 billion from operating profit in 2005. The Tokyo-based company plans to raise tire prices 5 percent in China next year, China Business News reported on Nov. 24, citing Hiromichi Odagiri, head of Bridgestone's China operations.

China, the world's fastest-growing tire market with annual growth exceeding 10 percent, has drawn on stockpiles to meet demand.

Chinese output of tires in the first ten months of this year rose 28 percent from a year earlier to 249 million units, according to China Petroleum and Chemical Industry Association. Passenger vehicle production gained 15 percent to 3.15 million units in the first 10 months, compared with a year earlier.

Sheets of ribbed smoked rubber have surged 57 percent to 71.3 baht, or $1.73, a kilogram this year on the Agricultural Futures Exchange of Thailand.

Thailand exported 1.5 million metric tons of rubber to China last year, worth $2.5 billion at current prices. Output has declined by at least 10 percent in the three southern provinces that account for about 15 percent of Thai production.

HAT YAI, Thailand Rubber prices may rise to the highest in 21 years as violence in Thailand prevents the world's biggest supplier from meeting Chinese demand.

Plantation owners in Thailand, which supplies 38 percent of the world's rubber, are being hampered by fighting between Muslim activists and the police in the southern part of the country. Production, already hampered by heavy rains, may fall further because a curfew and fear of attacks are reducing the time workers spend tapping rubber trees.

"It looks like rubber output in the major producing regions will decline," Hiroshi Munakata, a Tokyo-based commodities analyst with the brokerage firm Asahi Trust, said in an interview. "Political instability and unfavorable weather will have a significant effect."

Output of manufactured rubber in southern Thailand fell 4 percent in October from a year earlier to 69,000 tons, according to the central bank. National production this year may fall short of the three million tons posted in 2004, said Saelim Piyaporn, manager of the Thai Rubber Association. A decline this year would be the first since 1996.

Natural rubber on the Tokyo Commodities Exchange, the world's largest futures market for the material, may increase 4 percent to ¥230, or $1.91, a kilogram in 2006, according to traders and analysts.

Chinese automakers are increasing output by about 15 percent and their demand for rubber is rising. Rubber supplies have plunged 78 percent this year in warehouses monitored by the Shanghai Stock Exchange.

Commodities from copper to crude oil are surging because of orders from China. Prices for copper, oil and iron ore rose to records this year, helping lift the Total Return index of the Goldman Sachs Commodity index 22 percent in the first 11 months, compared with a 3 percent gain by the Standard and Poor's 500 index.

Tokyo rubber futures are up 69 percent this year. Natural rubber prices ended trading at ¥221.6 a kilogram on Friday, the highest closing price in 17 years. Forecasts for next year's high in the Bloomberg survey ranged from ¥190 to ¥250.

U.S. Gulf spot prices for butadiene, an oil product used to make synthetic rubber, have climbed 34 percent to 49 cents a pound this year, according to data compiled by Bloomberg.

The tire industry is the biggest consumer of rubber. The higher prices for synthetic material have prompted some buyers to switch to natural rubber, which accounts for about 42 percent of the market, from 39 percent three years ago, according to the International Rubber Study Group.

"Rubber prices will stay at high levels and may hit records next year," Lin Hui, a commodity analyst at China International Futures (Shanghai), said Dec. 1.

Higher prices are prompting the tiremakers Bridgestone, Michelin and Goodyear Tire & Rubber to charge more for their products.

Michelin said rising raw material costs could hurt earnings in 2006. The company this year has raised North American prices for truck tires by as much as 11 percent and for car tires by as much as 14 percent.

Bridgestone, the world's largest tiremaker by sales, said last month that higher costs of rubber and other materials could trim more than ¥80 billion from operating profit in 2005. The Tokyo-based company plans to raise tire prices 5 percent in China next year, China Business News reported on Nov. 24, citing Hiromichi Odagiri, head of Bridgestone's China operations.

China, the world's fastest-growing tire market with annual growth exceeding 10 percent, has drawn on stockpiles to meet demand.

Chinese output of tires in the first ten months of this year rose 28 percent from a year earlier to 249 million units, according to China Petroleum and Chemical Industry Association. Passenger vehicle production gained 15 percent to 3.15 million units in the first 10 months, compared with a year earlier.

Sheets of ribbed smoked rubber have surged 57 percent to 71.3 baht, or $1.73, a kilogram this year on the Agricultural Futures Exchange of Thailand.

Thailand exported 1.5 million metric tons of rubber to China last year, worth $2.5 billion at current prices. Output has declined by at least 10 percent in the three southern provinces that account for about 15 percent of Thai production.