China, the world's largest rubber consumer, was chasing nearby cargoes as local tyre makers took advantage of a price drop, but worries about poor car sales may limit future purchases, dealers said on Monday. Cash rubber prices have slipped nearly 4 percent in the past week, led by declines in Tokyo futures as oil moved away from record highs above $147 a barrel hit in July.
The Japanese market sets the tone for physical prices in Southeast Asia. Indonesia's SIR20 was sold to various buyers, including tyre maker Bridgestone, at 131.50 US cents per pound ($2.89 a kg) free on board Belawan, Palembang and Surabaya for December shipment, while August was sold at 132.00 cents FOB Belawan. The deals were struck late on Friday, when Indian buyers also bought Malaysia's SMR20 at $3.01 a kg. Thailand's RSS3 grades had trouble finding buyers, dealers said.
"China is in the market for August and September shipments and I think they still need some cargoes. But I am sure they will slow down again if the price rebounds for some reasons," said a dealer in Pekanbaru, the provincial capital of Riau in Sumatra. Worries about falling demand for rubber have weighed on the market after car makers reported falling sales, blamed on the slowing US economy.
Car sales in China, the world's second-largest vehicle market after the United States, rose at their slowest annual pace in two years in July as a fuel price hike and easing economic growth spurred consumers to delay purchases. "Since the automobile industry has shown signs of slowing down recently, in the fourth quarter of the year the slowdown will spread to the tyre industry," said a dealer in China's south-eastern province of Fujian.
China's car sales have grown by 20 percent or more per year for the last three years, but the pace slowed to 17.07 percent in the first half of this year due to a decelerating economy, a weak stock market and a devastating earthquake in May. Rising rubber stocks in Shanghai could restrict imports as more stocks arrived from China's main producing island of Hainan, said dealers.
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