Rubber Reaches Five-Month Low as Debt Crisis May Slow Recovery

By Aya Takada

May 17 (Bloomberg) -- Rubber slumped to the lowest in five months as equity markets extended losses on concern Europe’s sovereign debt crisis may slow the economic recovery, and as a stronger Japanese currency cut the appeal of yen-based contracts.

Futures in Tokyo lost as much as 3.6 percent to the lowest level since December. The price has tumbled 25 percent since climbing to a 21-month high of 338.5 yen ($3,672 a metric ton) on April 16.

Commodities dropped on speculation that austerity measures planned by indebted European nations including Spain and Greece will cut growth in the region. Crude oil traded at a three-month low, strengthening the appeal of synthetic rubber made from petroleum.

“Investors are cutting holdings of their risk assets on concern that the debt crisis may derail economic growth,” Kazuhiko Saito, an analyst at commodity broker Fujitomi Co. in Tokyo, said today by phone. “A stronger yen is another blow to futures in Tokyo.”

Rubber for October delivery, the most-active contract, fell as much as 9.4 yen to 252.8 yen before trading at 254 yen on the Tokyo Commodity Exchange at 11:52 a.m. local time. The yen strengthened for a third day to 92.07 per dollar.

Crude oil for June delivery slumped for a fifth day, dropping as much as 2.5 percent to $69.82 a barrel on the New York Mercantile Exchange before trading at $70.31, the lowest since Feb. 5.

Slowing Purchases

The MSCI Asia Pacific Index of equities tumbled 2.3 percent to 117.23 as Europe’s debt crisis and concern that China will move to quell inflation eroded investor confidence in the economic recovery.

“The euro nations are taking actions for their fiscal problems but they are running out of options,” said Kazuhiro Takahashi, a general manager at Daiwa Securities Capital Markets Co. in Tokyo.

September-delivery rubber on the Shanghai Futures Exchange lost 1.6 percent to 21,395 yuan ($3,134) a ton.

Natural rubber inventories monitored by the Shanghai exchange fell 5,951 tons to 29,899 tons, based on a survey of 10 warehouses in Shanghai, Shandong, Yunnan, Hainan and Tianjin, the bourse said May 14. It was the lowest level since July, 2008.

“Chinese buyers may be slowing purchases, expecting a further drop in the raw material price,” Saito said.

(bloomberg.com)