Rubber Declines to One-Month Low as Debt Concerns Cut Appeal

By Aya Takada and Supunnabul Suwannakij

April 28 (Bloomberg) -- Rubber tumbled to a four-week low after credit-rating downgrades of Greece and Portugal stoked concern that debt-laden nations may be moving closer to default, prompting an increase in risk aversion among investors.

Futures in Tokyo fell 1.9 percent to 305.8 yen a kilogram ($3,278 a metric ton), the lowest closing price since March 25, extending a decline from a 21-month high of 338.5 yen reached on April 16 and heading for its worst monthly performance since September.

Asian stocks fell, extending a global rout, after the rating downgrades spurred concern Europe’s debt crisis may derail the global economic recovery.

“Rubber came under pressure along with other commodities as concern about European debt problems spurred investors to cut their holdings of risk assets,” Takaki Shigemoto, an analyst at research and investment company JSC Corp. in Tokyo, said today.

Greece’s credit rating was cut three steps to BB+, or junk, by Standard & Poor’s, the first time a euro member has lost its investment grade since the currency’s 1999 debut.

Standard & Poor’s also warned that bondholders could recover as little as 30 percent of their initial investment if the country restructures its debt. The Greek move came after the rating company reduced Portugal by two steps to A-.

“Concerns about European budget issues are increasing again and that’s discouraging people from putting their money into risky assets,” said Hiroichi Nishi, an equities manager at Nikko Cordial Securities Inc. in Tokyo. The MSCI Asia Pacific Index fell 1.6 percent to 125.11 as of 10:22 a.m. in Tokyo.

Rubber futures have gained 11 percent this year as the global economy recovered from the worst postwar recession, boosting raw material demand. The market was also supported by a seasonal decrease in supply from Thailand, the largest producer.

Cheaper Supplies

The free-on-board price, which excludes freight and insurance, of Thai RSS-3 grade rubber for May delivery fell to 130.05 baht ($4.03) per kilogram from a record 130.55 baht touched yesterday, according to the Rubber Institute of Thailand.

The auctioned price of RSS-3 fell 1.2 percent to 118.55 baht a kilogram as some buyers shifted to cheaper supplies from Indonesia, the institute said.

The rubber market will stay supported by a faster-than- expected global economic recovery and by accelerating growth in demand, the Association of Natural Rubber Producing Countries said in an April newsletter.

Natural rubber prices will remain high until at least June as supplies from the three biggest producing countries remain tight and demand for tires from automakers expands, Abdul Rasip Latiff, chief executive officer of the International Rubber Consortium Ltd., said in an interview yesterday.

The average physical price of natural rubber from Thailand, Indonesia and Malaysia will be about $3.20 to $3.30 per kilogram in the second quarter, “based on fundamentals,” Abdul Rasip said. The price has averaged $3.19 this year,

September-delivery rubber on the Shanghai Futures Exchange tumbled 2.3 percent to settle 23,385 yuan ($3,426) a ton.

(businessweek.com)