Rubber Advances to Three-Week High as Oil Gains, Yen Declines

By Aya Takada and Supunnabul Suwannakij

May 27 (Bloomberg) -- Rubber advanced for a second day to the highest level in three weeks as a rally in crude oil and limited supplies from Thailand, the largest producer, boosted demand for the commodity used to make tires.

Futures in Tokyo were also bolstered by a fall in Japan’s currency against the dollar, which raised the appeal of yen- denominated contracts. The yen weakened as signs that Asia- Pacific economies are recovering sapped demand for Japan’s currency as a refuge.

“Overall sentiment is bullish” given the gains in oil and other commodities, Kazunori Kokubo, general manager of the international business department at commodity broker Yutaka Shoji Co., said by phone from Tokyo.

Rubber for November delivery, the most-active contract on the Tokyo Commodity Exchange, rose as much as 3 percent to 281.90 yen per kilogram ($3,122 a metric ton) before settling at 281.3 yen. Earlier, it fell to 272 yen on concerns that Europe’s debt crisis may stall economic recovery in the region.

Oil futures in New York climbed as much as 1.5 percent, boosting the cost of making synthetic rubber from naphtha. The yen declined to 110.54 per euro as of 6:40 a.m. in London from 109.47 in New York yesterday.

The most-active rubber contract gained 5.5 percent this week, a second weekly gain, amid worries that there’s continued tight supply from major producing countries. The “supply situation hasn’t improved,” Kokubo said.

Tight Supply

The low supply from key producers together with robust demand in Asia will keep the market strong, the Association of Natural Rubber Producing Countries said in its May newsletter on May 25. Demand from China, India and Malaysia, which account for more than 45 percent of global consumption, should stay robust, the association said.

Cash prices in Thailand, the largest exporter, extended gains as rains in some southern provinces disrupted tapping, lowering supply, the Rubber Research Institute of Thailand said on its website today. Processers continued purchases on worries there’s a supply shortage, it said. Thai RSS-3 grade rubber for June delivery rose 1.6 percent to 125.40 baht ($3.85) a kilogram.

September-delivery rubber on the Shanghai Futures Exchange added 0.8 percent to settle at 22,585 yuan ($3,306) a ton.

(bloomberg.com)