China's rubber import default material will not repeat itself

Industry insiders believe that China's rubber import defaults will not repeat itself in 2008 because the recovery of the auto industry has boosted its demand, and adverse weather has caused a decrease in rubber production.

Integrated media reported on October 28th that because rubber exporters still remembered about China’s breach of contract to abandon import orders two years ago, they requested buyers to pay deposits for contracts signed at high prices. However, the recovery of the global auto industry and the unpredictable weather have caused a decrease in rubber production, so the default event will not be repeated.

In 2010, China's rubber consumption is expected to increase by nearly 9% to 3.3 million tons, and car sales are expected to jump by more than 30%, while wet weather will dampen supply by at least the first quarter of next year. China will pay higher prices.

The price of rubber in Shanghai reached a record high of $4,505 per ton, which is due to the fact that the world's largest consumer of rubber is eager to establish inventory for fear of further increase in the price of tire rubber. The current price is at $4 per kilogram. Record high.

The rally has spread to the Tokyo rubber market, making the most active contract rise to a two-year high of about 343 yen per kilogram, setting the tone for spot rubber prices.

Ker Chung Yang, an investment analyst at Singapore Phillip**, said that he does not rule out the possibility of price corrections in the next two months. However, given the strong fundamentals, Thailand's flooding, China’s strong typhoon and strong domestic demand, global industries are recovering from the trough, so car sales will increase in the coming months.

In Indonesia, the world’s second-largest rubber producer, where exporters still have fresh memories of previous defaults, they urged buyers to demand a maximum deposit of 20% in order to prevent the decline in Japanese plastic prices to lower spot prices.

Dealers said that Thai and Malaysian exporters also require a minimum margin of 10%, although only for buyers who had previously had problems with their reputation.

Chinese importers shocked the rubber market at the end of 2008. At that time, prices of natural rubber ** plunged nearly 50% in one month, ranking the top of commodity price declines. Therefore, some importers would rather lose the previously paid 10 %-15% of the deposit, voluntarily waive the contract in order to avoid greater losses.

However, it is expected that the breach will not repeat itself because there is no sign of a slowdown in China's rubber imports.

China's rubber production can only meet one-fifth of domestic demand. From January to September this year, China's natural rubber imports increased to 1.337 million tons, an increase of 2.37%, and September imports increased by more than one-fifth from the same period of last year.

According to data from the China Rubber Council, domestic tire production in 2010 is expected to be close to 3.5 million tons, and in 2001 it was less than 500,000 tons. With the increase in car sales, tire production will continue to increase.

Djoko Said Damardjati, general secretary of the Natural Rubber Producing Countries Association ANRPC, predicts that the Chinese market will not suddenly change. China's economy is developing rapidly and domestic consumption is also very strong.

IRSG, an international rubber research organization, previously stated that with the global economic recovery boosting car sales, global rubber demand in 2010 will increase from 21.2 million tons to 23.9 million tons. In 2011, global demand will rise to 25.5 million tons.