Rubber prices to rally on rising domestic car sales

Rubber prices are expected to climb as much as 19 percent by the end of next year as rising vehicle sales in China boosts demand, said Marubeni Corp, the largest Japanese trader of the commodity.

The cash price will probably trade between $1.80 and $2.30 per kg in the six months starting Jan 1 and range from $2 to $2.50 in the second half, said Roka Komiya, a trader at the rubber section of Tokyo-based Marubeni. The commodity currently trades at $2.10 per kg, and may retreat to as low as $1.50 later in 2009 before recovering, he said in an interview.

Futures in Tokyo have gained 46 percent this year as the global recession eases and demand rises from tiremakers including Bridgestone Corp and Michelin & Cie, the world's top two producers. The US, Germany and Japan have offered incentives to purchase new cars to save the automobile industry from the worst slump in decades. Vehicle sales in China, the biggest natural rubber consumer, rose 71 percent in July.

"Chinese demand will continue to increase as we can't see any negative factors," Kazutaka Sonomoto, manager at Marubeni's rubber section, said in the same interview in Tokyo on Tuesday. Car ownership in China will accelerate, he said.

February-delivery rubber traded at 198.8 yen per kg ($2,141 a ton) on the Tokyo Commodity Exchange at in afternoon trade. Prices reached 214.5 yen on Aug 31, the highest level for the most-active contract since Oct 8.