Rubber Advances as Stocks Rally Boosts Confidence in Recovery

By Aya Takada

May 13 (Bloomberg) -- Rubber advanced for the first time in three days as a global equity rally raised investor confidence in the economic recovery, boosting demand for raw materials.

Futures in Tokyo rebounded as much as 3.5 percent to 271.5 yen per kilogram ($2,914 a metric ton). The contract has dropped 9 percent this month on concern that the sovereign debt crisis that began in Greece will spread to other European countries.

Asian equities climbed, led by tech stocks, after International Business Machines Corp. and Cisco Systems Inc. earnings boosted confidence in the industry and as concerns eased about Europe’s debt crisis. The euro rose after Portugal sold 1 billion euros ($1.3 billion) of 10-year bonds yesterday, getting higher demand than at previous auctions.

“Corporate earnings showed recovery in manufacturing activities,” Takaki Shigemoto, an analyst at research and investment company JSC Corp. in Tokyo, said today by phone. “Raw material demand will grow on rising production.”

Rubber for October delivery, the most-active contract, gained 4.4 yen to 266.7 yen a kilogram on the Tokyo Commodity Exchange at 11:41 a.m. local time.

Japanese companies including Toyota Motor Corp. and Panasonic Corp. forecast profits will surge this year as exports and cost cuts drive a recovery from the worst recession on record. Toyota, which vowed to slash 290 billion yen in costs, predicted profit will gain 48 percent.

The automaker is expanding in China and India, where rising wages and consumer confidence is fueling demand for cars, televisions and factory equipment.

Rubber futures reached a 21-month high of 338.5 yen on April 16 on rising demand and as supply from Thailand, the world’s largest exporter, declined seasonally.

‘Picking Up’

Growers in Thailand’s main producing area are beginning to resume tapping rubber trees after the low-production season, Shigemoto said. During February to April, rubber trees shed leaves and latex output slows, a period known as wintering.

“Shipments of smoked-sheet rubber from Thailand will probably start picking up early next month,” Shigemoto said. “Until then, supply in the international market will remain tight, buoying rubber prices.”

The free-on-board price of Thai RSS-3 grade rubber for June-delivery, which excludes freight and insurance, was unchanged at 112.65 baht ($3.48) a kilogram yesterday, according to the Rubber Institute of Thailand. The price climbed to a record 130.55 baht on April 28.

Rubber also advanced on speculation that China, the world’s largest consumer, may increase purchases to replenish inventories after stockpiles dropped to the lowest level in almost two years, Shigemoto said.

Natural rubber stockpiles monitored by the Shanghai Futures Exchange fell 2,968 tons to 35,850 tons, the bourse said on May 7. The volume was the smallest since August 2008.

September-delivery rubber on the Shanghai Futures Exchange declined 0.2 percent to 22,245 yuan ($3,258) a ton at 10:46 a.m. local time.

(bloomberg.com)