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Rubber demand up on vehicle sector expansion

By Feiwen Rong (China Daily)
Updated: 2010-03-17 10:02

China's natural rubber production growth may be little changed this year as a drought in key growing regions curbs output, said Zhu Xiuyan, president of the China Natural Rubber Association.

"China produced about 642,000 tons of natural rubber in 2009, and my estimate at the moment is we will see output stay at that level this year," Zhu said in an interview with Bloomberg News at a conference in Qingdao. Imports may rise this year on government efforts to lift domestic consumption, Zhu said.

Natural rubber demand may rise 7 percent to 2.89 million tons on strong growth in the vehicle market, Fan Rende, head of the China Rubber Industry Association, said.

Surging demand helped increase consumption of natural rubber used in tires, doubling the price in 2009. China is currently the world's largest rubber consumer.

"Natural rubber production is likely to be flat this year as the lost output from a severe drought in the southwestern China may offset the increase in output from a rise in the total acreage," Zhu said. "The drought in Yunnan is particularly dire, but fortunately the situation seems not that bad in the main producing area of Xishuangbanna."

That region accounts for 40 percent of total production in Yunnan, Zhu said.

Yunnan is China's second-largest rubber producer after Hainan province.

Xishuangbanna is in southern Yunnan near the borders with Myanmar and Laos.

'Severe drought'

The southwestern region is suffering from a severe drought, with water levels in major rivers at record lows, the Ministry of Water Resources has said. About 5.3 million hectares of crops are under stress in the region, about half of them in Yunnan province alone, the ministry said on March 11.

"We all know that exports will be declining because of trade barriers and a weak export market, so the bulk of the demand for rubber products will come from within China," Zhu said. "So everything hinges on domestic consumption."

China overtook the US as the world's largest auto market in 2009 as government stimulus boosted sales by more than 40 percent. Total tire consumption will rise to more than 404 million tires in 2010 compared with a record 380 million last year, China Rubber Industry Association's Fan said.

China's natural rubber imports gained 1.7 percent last year to 1.71 million tons, according to customs data. Compound rubber imports, consisting of mostly natural rubber, almost doubled from a year earlier to 1.02 million tons last year, after China scrapped import tariffs on products from major producing countries, according to Hangzhou Dadi Futures Co.

Rubber for August delivery lost as much as 1.5 percent to 277.2 yen per kilogram ($3,077 a ton) on the Tokyo Commodity Exchange, the lowest level for the most active contract since Feb 12.

Bloomberg News