Rubber Jumps to 20-Month High as Thai Price Rallies to Record

By Aya Takada and Supunnabul Suwannakij

April 5 (Bloomberg) -- Rubber surged to a 20-month high as prices in Thailand, the biggest exporter, may extend a record- breaking rally on low supply, and as U.S. jobs data enhanced optimism that the economic recovery will boost demand for the commodity used in tires.

Futures in Tokyo gained as much as 2.7 percent to 326.8 yen per kilogram ($3,456 a metric ton), the highest level since Aug. 1, 2008, extending a 10 percent jump in the past two weeks.

Prices in Thailand may rise to 120 baht ($3.71) a kilogram in the next two months as demand increases and supplies decline because of a drought, Supachai Phosu, deputy minister of agriculture and cooperatives, said on April 2. U.S. employers added the most jobs in three years, data showed the same day, boosting optimism that an economic recovery will raise demand for rubber.

“The market is in a bullish mood because of tight supply from Thailand and positive economic data from the U.S.,” Kazuhiko Saito, an analyst at commodity broker Fujitomi Co. in Tokyo, said today by phone. “Futures may extend gains if Thai prices continue to rally.”

Rubber for September delivery settled at 326.6 yen on the Tokyo Commodity Exchange.

Prices of ribbed smoked sheet rubber in Thailand may keep rising as drought lowers latex levels, while demand remains strong, Supachai said.

“The forecast provides positive psychological sentiment to the market, which helped drive the Tokyo prices higher,” said Chaiwat Muenmee, an analyst at DS Futures Co. from Bangkok.

The free-on-board price of RSS-3 grade rubber for delivery in May reached a record 116.55 baht per kilogram, according to the Rubber Research Institute of Thailand. Latex output falls as the nation is in the low-production season, known as wintering, when rubber trees shed their leaves and producers reduce tapping.

Output Declines

Supplies from Thailand are equivalent to about 60 metric tons per day, compared with a daily average of 200 tons during the high-production period, Chaiwat said Friday.

U.S. payrolls rose by 162,000 last month, less than anticipated, after a revised 14,000 decrease in February that was smaller than initially estimated, figures from the U.S. Labor Department showed on April 2. The March increase included 48,000 temporary workers hired by the government to help conduct the 2010 census. The unemployment rate held at 9.7 percent.

“It’s a good, solid report,” Treasury Secretary Timothy F. Geithner said in a Bloomberg Television interview in New York on April 2. “It shows we’re getting stronger and the economy is now creating jobs.”

The Shanghai Futures Exchange is closed today for a holiday. Natural rubber inventories fell 11,063 tons to 63,157 tons, the lowest level since August 2009, the bourse said on April 2, based on a survey of 10 warehouses in Shanghai, Shandong, Yunnan, Hainan and Tianjin.

“Chinese buyers reduced rubber purchases because of higher prices, leading to a drawdown in inventories,” Saito at Fujitomi said.

(businessweek.com)