Events Calendar
In This Section
Most Read Stories
Man robbed at Tallmadge Avenue eatery
Another winter punch heading toward Ohio
Four teens restrain man, take items from his Akron home
Complaints against officer keep coming
Police: Ohio girl dies after fall into snow bank
Region makes way for latest batch of snow; cancellations rise
Cuyahoga Falls residents come home to find burning couch on balcony
Blogs:
First Bell - On Education:
No City of Akron basketball tonight
Pets:
Pet telethon re-airs
The Heldenfiles:
Chipmunks "Squeakquel" on DVD/BD March 30
Akron Zips:
Late surge gives Zips ugly road win
Tribe Matters:
Blogmail response on Hafner
Cleveland Browns:
Stallworth's contract terminated
Balanced Ledger:
QB in Browns future: another mock draft
Kent State Sports:
KSU Notes – February 9
Cleveland Cavaliers:
NBA Power Rankings from Around the Internet
Buckeye Blogging:
Buckeyes grab 18 players on signing day
Varsity Letters:
Garfield at Buchtel basketball
All Da King's Men:
Palin At The Tea Party Convention
Blog of Mass Destruction:
Republican Pre-Conditions
Akron Law Café:
Law, Love and Chocolate
Car Chase:
Collector Car Hobby Loses One of the Best—Jim Roll
Let's Talk Real Estate:
Decisions Decisions: Credit Cards or Your Mortgage?
Ohio Travels with Betty:
Loucile is looking for a Lake Erie getaway in June for three kids, ages 1, 3, and 5.
Sound Check:
Talk of the Town – Top entertainment picks for the weekend
HRLite House:
OFCCP Report
Akron Gamer:
Makers of 'Castle Crashers' unveil 'BattleBlock Theater'
See Jane Style:
Do IT this week: Layering
Lower costs may add to Bridgestone earnings
By Rattaphol Onsanit
Bloomberg News
Published on Sunday, Apr 26, 2009
The 42 percent, four-month rebound in rubber prices might be coming to an end as global tire demand plunges the most in three decades.
Tire makers, the biggest consumers of rubber, could report a 6.8 percent sales slump in 2009 as the global recession cuts auto demand, according to the government-funded International Rubber Study Group in Singapore. Supplies from Thailand, the top exporter, will increase after a seasonal drop, producers say. Prices of $1,530 a ton are 18 percent higher than alternatives made from oil, data compiled by Bloomberg News shows.
Michael Coleman, who helps manage a commodity fund that returned 24 percent last year, and Felix Yeo, trading manager at the Singapore unit of Marubeni Corp., say prices might weaken as much as 35 percent.
Bridgestone Corp., the world's largest tire company with operations in Akron, said in February that lower rubber and raw material costs might add $1 billion to earnings this year.
''I see the price going toward $1,000 or $1,200'' a metric ton by the end of September should the economy fail to grow, said Yeo. Marubeni is Japan's biggest rubber-trading company. ''Major economies have yet to make a significant recovery.''
The advance in global commodity prices this year is a ''little premature'' because there's no evidence of improved demand, said Sean Corrigan, who helps manage $5 billion in commodities at Diapason Commodities Management SA in Lausanne, Switzerland. Copper is this year's best performer, jumping 57 percent, while lead is up 56 percent and gasoline 48 percent.
Auto sales slump
Rubber might decline toward $1,000 a ton in the next year, said Singapore-based Coleman, managing director at Aisling Analytics, which runs a $1.2 billion commodity hedge fund.
Demand will drop because people are buying fewer cars and delaying the purchase of replacement tires. U.S. auto sales plunged 37 percent in March, and the annual rate fell to the lowest in more than 25 years in February, according to Autodata Corp. Japan's sales tumbled 32 percent in March to a level not seen in more than three decades. U.S. vehicle miles traveled fell by 7
billion, or 3.1 percent, in January from a year ago, the Federal Highway Administration said.
Car production in Europe will probably drop 25 percent, and sales are likely to fall 20 percent this year, according to the European Automobile Manufacturers Association.
Global sales of passenger car and commercial vehicle tires might tumble as low as 1.32 billion units in 2009 from 1.41 billion last year, said No Dock Moung, an analyst with the International Rubber Study Group, which represents producers and users. The drop would be the most since at least 1975, he said.
China cushion
Tires accounted for 67 percent of natural rubber consumption last year, with conveyor belts, gloves, seals, carpets and condoms taking most of the rest, he said.
''Of course we all may get lucky'' should government stimulus spending revive demand, said Coleman, former managing director of Cargill Inc.'s Asia-Pacific energy division and former head of the company's global rubber-trading business.
China, the world's third-biggest economy, may rebound this quarter as Premier Wen Jiabao's $585 billion stimulus package cushions the effect of the global recession.
Rubber imports by China, the largest consumer, climbed to 190,000 tons in March from 180,000 in the first two months, according to customs data. The rise was fueled by a 10 percent increase in passenger car sales in March from a year ago to a record 772,400, according to the China Association of Automobile Manufacturers, after government subsidies spurred purchases. Japan, Germany and France are also offering incentives.
Any revival in rubber demand from recovering car sales might be mitigated as tire makers switch to cheaper oil-based alternatives. The mix of synthetic to natural rubber in tires is roughly 60 percent to 40 percent, said Lawrence Orlowski, an analyst at S&P Equity Services in New York. Usually about 5 percent to 10 percent of a tire's material can be switched, he said.
Rubber at $1,530 a ton on the Singapore Commodity Exchange costs 18 percent more than the $1,250 to $1,350 a ton for petroleum-based alternatives in Southeast Asia, according to ICIS, a pricing service. The gap widened to 35 percent in mid-January, the most since July 2006, data compiled by Bloomberg show.
''Demand may shift from natural to synthetic rubber as the differential widens,'' said Takaki Shigemoto, an analyst at Tokyo-based broker Okachi & Co. ''In India, where natural rubber represents about 75 percent of consumption, demand may easily switch to synthetics. In Japan, as synthetics represent almost 60 percent of consumption, a shift may not occur.''
Goodyear Tire & Rubber Co. can change more than 20 percent of its natural rubber to synthetics or synthetics to natural material ''without impacting tire performance,'' spokesman Keith Price said. ''We continue to push this important initiative so we can substitute based on price.''
Even with the $1 billion savings from raw materials, Bridgestone will barely break even this year as sales tumble. The Tokyo-based company said in February earnings will probably plunge 71 percent and sales could drop 22 percent.
Global demand for both forms of rubber might slide 9 percent this year, more than double last year's drop, according to the International Rubber Study Group. Usage will shrink at least 6.1 percent to 20.8 million metric tons, and the slump likely will be greater if the recession worsens, Hidde Smit, secretary-general of the group, said in March.
Truck tonnage
''The macroeconomic situation has deteriorated rapidly and so has the outlook for the tire industry,'' Robert Simmons, head of rubber and tire research at LMC International Ltd., said in March. ''The truck tire market has been hit the hardest as freight demand has been so badly hurt.''
U.S. truck tonnage dropped 9.2 percent in February from a year ago, the American Trucking Association said March 25. Fleets were still ''witnessing a tough environment'' with no signs of a ''sustained recovery,'' association Chief Economist Bob Costello said in a statement on its Web site.
Rubber supplies will increase in coming months as trees produce more latex after a slow seasonal period known as wintering, said Vorathep Wongsasuthikul, a director of the International Rubber Consortium Ltd. that represents Thailand, Indonesia and Malaysia. Thai production totaled 1.62 million tons in the second half of last year, up 13 percent from 1.44 million in the first half, according to the Rubber Research Institute of the Thai farm ministry.
Efforts by the three countries to buoy prices might spur future supplies, according to Aisling's Coleman. The nations, which harvest about 7 million tons a year, cut exports by 270,000 tons in the first quarter, according to the group.
''Rubber should come down around May,'' said Prachai Kongwaree, president of Thai Rubber Glove Manufacturers Association. ''There is more supply from Thailand.''
The 42 percent, four-month rebound in rubber prices might be coming to an end as global tire demand plunges the most in three decades.
Get the full article here.
Comments
Click here to post your comments
Orrville, Oh
Posted 05:49 PM, 04/26/2009
Rubber prices may decline after Rubber Companies are awarded more property tax abatement, tax incentive, tax credit, tax refund, and tax exemption and Rubber Companies Foreign and Domestic Investors and Stockholders locate more nonunion parasites willing to work for fewer wages than they can afford life!
