Rubber Gains to One-Week High as Thai Riots May Disrupt Supply

By Aya Takada

May 20 (Bloomberg) -- Rubber advanced to the highest level in more than a week as clashes between security forces and protesters in Thailand raised concern that supply from the world’s largest exporter may be disrupted.

Futures in Tokyo gained for a third day, advancing as much as 2.3 percent to the highest level since May 11, as fighting continued in Bangkok a day after the forced surrender of anti- government protesters left 16 people dead.

Rioters set fire to 31 buildings including several banks in Bangkok, Thanom Onketpol, an adviser to the city’s governor, said on the PBS television network. Protesters also torched a city hall in Udon Thani province and seized a government building in Khon Kaen, both in the northeast of the country. Thailand is the world’s largest producer and shipper of rubber.

“Riots in Thailand were spreading from Bangkok to other areas, raising concern that violence may escalate further and disrupt transportation of the raw material,” Takaki Shigemoto, an analyst at research and investment company JSC Corp. in Tokyo, said today by phone.

Rubber for October delivery, the most-active contract, gained as much as 6.1 yen to 273.8 yen per kilogram ($2,984 a metric ton) before trading at 269.3 yen on the Tokyo Commodity Exchange at 11:52 a.m. local time.

The price earlier declined to as low as 262.6 yen as a drop in equities markets raised speculation that economic growth may stall. Asian stocks fell for the fifth straight day amid concern that Europe’s debt crisis may derail a recovery as governments take austerity measures to reduce deficits.

Risk Appetite

The risk appetite of investors also dropped as Germany this week introduced a temporary ban on naked short selling to calm the region’s financial markets.

“Germany’s short-sale restriction is prompting suspicion that the situation is actually worse than investors think,” said Mitsushige Akino, who oversees the equivalent of $450 million at Ichiyoshi Investment Management Co.

Rubber futures have retreated 20 percent after climbing to a 21-month high of 338.5 yen on April 16 on a seasonal drop in supply from Thailand.

Producers in Thailand’s south, the major growing area, have resumed tapping rubber trees as the low-production period known as wintering ends, Shigemoto said.

Thai shippers offered so-called RSS-3 grade rubber for July shipment at $3.50 a kilogram yesterday, up from $3.15 on May 14, he said.

September-delivery rubber on the Shanghai Futures Exchange added 0.5 percent to 21,955 yuan ($3,216) a ton at 10:58 a.m. local time.

(bloomberg.com)