Chinese rubber-for-loans bets at risk

ERJ staff report (BC)

Singapore – Chinese investors have been piling up rubber as collateral for financing, recently driving prices to 10-month highs and rubber stocks to at least three-year highs, report Lewa Pardomuan and Rujun Shen of Reuters.

Copper, zinc and steel have been used as financing tools in China in the past few years, but the move into rubber to back loans has been reported as raising concerns about the potential impact on the rubber market from such a large inventory overhang.

But investors in the rubber could face risks from a slower pace in car sales, sluggish economic growth and hence rubber consumption – quite apart from the perishability of the rubber stocks themselves.

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