China rubber stocks fall as port probe hits financing -sources

GKE

25/06/2014 02:10

(Repeats earlier story with no change in text) 
    * Rubber stocks at Qingdao port fall more than 9 pct from 
May peak-sources 
    * Drop partly linked to financing drying up after port fraud 
probe 
    * Benchmark Tokyo futures down more than a fifth this year 
 
    By Lewa Pardomuan 
    SINGAPORE, June 24 (Reuters) - Rubber stocks in bonded 
warehouses in China's Qingdao port have fallen about a tenth 
from a peak in May, partly on reduced demand for the commodity 
as a loan collateral after a fraud investigation at the port, 
industry sources said. 
    The drying up of rubber financing deals shows how a probe at 
Qingdao port, the world's seventh busiest, into suspected fraud 
related to metal financing has had an impact on other 
commodities used in a similar fashion.  ID:nL5N0OU1K3  
 ID:nL3N0O61QH  
    Metals such as copper and zinc have been widely used for 
financing, a practice in which a commodity is pledged as 
collateral for a bank loan. But other commodities such as iron 
ore, soybeans and rubber have also been pulled into the trade, 
driving up stockpiles.     
    "After the investigation into metals, banks are more careful 
in granting financial support, so it's not like before," said a 
senior person involved in the rubber industry in Singapore. 
    The source, who declined to be named, said banks were being 
more selective and possibly more conservative.      
    The market closely monitors rubber stocks in Qingdao, which 
account for the bulk of inventory in China, the world's biggest 
consumer, but are not disclosed publicly. 
    Three dealers and analysts, who collect data from offices in 
Qingdao, estimated stocks of natural, synthetic and compound 
rubber slipped to 327,900 tonnes this week, from 362,200 tonnes 
in mid-May and around 341,000 tonnes in late June last year. 
    About 14 percent of the stock holding is compound rubber 
which dealers say is mostly tied to financing deals. Compound 
rubber is made of natural and synthetic rubber and used in 
tyres.  
    A drop in Qingdao stocks is usually positive for rubber 
prices as it implies stronger demand in a global market which is 
in its fourth year of oversupply.   
    But a sustained move away from the use of rubber for 
financing could also lead to a bigger liquidation of stocks in 
the market and another price slump.  
    Benchmark Japanese rubber futures  JRUc6  have lost about a 
fifth of their value this year, though they have rebounded from 
a near five-year low of around 190 yen per kg. Further gains 
could hinge on stock levels in Qingdao, dealers said. 
 RUB/T  RUB/AS  
     
    WAREHOUSES   
    Global banks including Standard Bank Group  SBKJ.J  and a 
part-owned unit of Louis Dreyfus Corp  LOUDR.UL , 
Singapore-listed GKE Corp  GKEC.SI  have warned of potential 
losses from the Qingdao scandal. Other banks are reviewing 
metals financing to some clients in China, while HSBC Holdings 
 HSBA.L  said it was assessing transactions on a case-by-case 
basis.  ID:nL5N0OU1K3  
    As financing dries up, holders may move their rubber cargoes 
to reputable warehouses, possibly outside China, to avoid paying 
taxes. But dealers also saw some real demand for compound rubber 
used in tyres, which accounts for about 60 percent of global 
rubber consumption.  
    The inventory of natural rubber in Qingdao, which represents 
2 percent of global output, has fallen more than 3 percent to 
261,000 tonnes since May, with a total value of about $530 
million at current market prices.   
    But stocks of compound rubber have dropped far more, by 
about a third since last month to 45,600 tonnes, less than half 
of this year's peak of 101,800 tonnes reached in January.  
    With domestic natural rubber trading at a discount of up to 
$200 a tonne to physical prices in Southeast Asia, speculators 
are reluctant to bring in more rubber into China.  
    "One of the reasons why stocks have fallen is because there 
has been less rubber for financing," said a China-based dealer 
who trades tyre-grade rubber from Southeast Asia. "I expect 
stocks to keep falling."    
 
 (Additional reporting by Rujun Shen in SINGAPORE and Osamu 
Tsukimori in Tokyo; Editing by Manolo Serapio Jr. and Ed Davies) 
 ((lewa.pardomuan@thomsonreuters.com)(+65 68703834)(Reuters 
Messaging: lewa.pardomuan.thomsonreuters.com@reuters.net)) 
 
Keywords: CHINA QINGDAO/RUBBER