Rubber inventories in China's bonded warehouses have fallen nearly 3 percent in the end of June and the beginning of July as credit-strapped tire makers have been forced to reduce imports and turn instead to domestic stocks.

Rubber at Qingdao, which makes up the bulk of China's inventories, has also been offered at a discount to prices in Southeast Asia this year after stocks rose well above the usual level of 250,000 tonnes, indicating ample supply. Inventories are not disclosed publicly, but dealers and analysts collect data on quantities from offices in Qingdao. Stocks at Qingdao were currently estimated at 341,900 tonnes, down from 350,700 tonnes in mid-June and a record high of 371,100 tonnes in late April, a Tokyo-based analyst said.

"The stocks have been reduced by 8,800 tonnes. Commercial banks do not lend more money to traders, so they can't import more natural rubber," said Gu Jiong, an analyst at Yutaka Shoji Co in Tokyo. A second analyst, who declined to be identified, provided similar figures. Tyre grade prices have tumbled to multi-year lows on worries about global economic growth and weakening demand from China, which accounts for 35 percent of global consumption.

A recent rebound in benchmark Tokyo rubber futures failed to have much impact on tire grade prices in Southeast Asia because of fears of a credit crunch in China and a crackdown on commodities imports that have been used for financing. A survey showing growth in China's services sector sagged to its weakest pace in nine months in June added to signs of a slowdown in the world's second-largest economy. China imported 2.18 million tonnes of natural rubber in 2012, up 3.64 percent year-on-year. It mainly buys rubber from Thailand, Indonesia, Malaysia and Vietnam.

Source: India Star