China sees higher rubber demand despite slowdown risks

Tuesday, 29 May 2012 02:02 - - {{hitsCtrl.values.hits}}

SINGAPORE (Reuters): China’s total in 2012, fuelled by demand from the automobile and other sectors, a senior rubber industry official said last week, despite a slowdown in the world’s second-largest economy.

China accounts for 35 percent of global natural rubber consumption, and its appetite will have a major impact on the market, which has been haunted this year by fears that Europe’s worsening debt crisis will crimp demand for commodities.

“The economy is slowing down, but there is still growth. Our growth rate has slowed down but the demand is larger than last year, of course,” said Mary Xu, deputy secretary-general of the China Rubber Industry Association, which has 1,300 members.

China’s factories took a hit in May as export orders fell sharply, a private sector survey showed on Thursday, suggesting surprise weakness in April’s hard economic data persists even as policymakers seek to shore up growth.

China’s tyre output will rise to 483 million pieces in 2012 from 456 million last year, while consumption of natural and synthetic rubber may increase to 7.4 million tonnes from last year’s 6.9 million, the industry body estimates.

“The tyres are not only for autos, but also for the mining industry and others,” Xu told Reuters on the sidelines of a conference organised by producer and consumer grouping the International Rubber Study Group.

China signalled on Wednesday that it wanted to step up private investment in its energy sector, in line with recently unveiled government plans to fast-track infrastructure investment to help combat the slowing economy.

China saw car sales rise 12.5 percent in April from a year earlier, more than double the modest pace of March as consumers trickled back to the showrooms ahead of the Labour Day holiday.

“In 2012, it is estimated that China’s rubber industry will develop with the speed of 8 percent,” Xu told the conference earlier.

Despite China’s encouraging numbers, the Tokyo Commodity Exchange global benchmark extended losses on Thursday and dropped to a four-month low after concerns about a possible Greek exit from the euro unleashed a broad sell-off in share and commodities markets. A worsening debt crisis in Europe could also prompt the International Rubber Study Group to revise its closely-watched supply and demand forecast in its next update in June.

The IRSG, which had forecast global demand for natural and synthetic rubber at 26.8 million tonnes this year, forecast 2013 global demand to rise just over 5 percent on the year to 28.2 million tonnes.

“I am pretty certain from the demand side numbers will not be going up,” the grouping’s secretary-general Stephen Evans told Reuters. “They will either be staying the same or they will be slightly fine-tuned downwards.” He added, “China is not headline news at the moment, they already made an announcement that things are coming down. The biggest news this week is of course Europe.”