Rubber Advances for Third Day on Oil, Yen, Outlook for Demand

By Supunnabul Suwannakij

June 14 (Bloomberg) -- Rubber gained for a third day as costlier crude oil, a weaker yen and signs that the global economic recovery remains intact boosted optimism that demand for the commodity used in tires may grow.

Futures in Tokyo advanced as much as 2.8 percent, extending the 1.8 percent climb over in the previous two sessions, after Japan’s large manufacturers said business conditions improved from three months ago, according to government report today.

Crude oil advanced in New York on speculation that sustained growth in the U.S. economy will boost fuel demand. The Japanese currency fell for a third day against the euro on signs the global economic recovery is gaining momentum.

“Sentiment remains favorable as signs of global economic expansion spur speculation demand for tires will continue growing,” said Chaiwat Muenmee, an analyst at DS Futures Co. “Crude oil’s rally, trading above $74 a barrel, and the weakening of the Japanese yen supported the rubber market.”

Rubber for November rose as much as 7.4 yen to 272.2 yen a kilogram ($2,962 a metric ton) before trading at 271.5 yen on the Tokyo Commodity Exchange at 11:59 a.m. Tokyo time.

Japan’s large manufacturers’ sentiment was 10 points compared with 4.3 points last quarter, the government said in the report. The survey asks respondents whether conditions improved from the previous quarter, and a positive number means optimists outnumber pessimists.

Crude’s Gain

Crude for July delivery rose as much as 1.2 percent to $74.66 a barrel in electronic trading on the New York Mercantile Exchange, making synthetic rubber more expensive. The yen fell against all 16 of its major counterparts, making yen-based rubber contracts cheaper for holders of other currencies.

“Further gains in TOCOM prices may be limited as increasing supplies from Thailand are still pressuring the market,” Chaiwat said from Bangkok. Output of ribbed smoked sheet RSS-3 rubber has averaged 200 metric tons a day this month compared with slightly more than 100 tons a day in May, Chaiwat said.

The free-on-board price of RSS-3 grade for July delivery dropped 0.4 percent to 113.85 baht ($3.51) a kilogram on June 11, the Rubber Institute of Thailand said on its website. It reviews the price daily and issues new data in the afternoons.

Natural-rubber inventories monitored by the Shanghai exchange rose 31 tons to 17,881 tons, based on a survey of 10 warehouses in Shanghai, Shandong, Yunnan, Hainan and Tianjin, the bourse said on June 11.

The Shanghai Futures Exchange is closed today for a holiday, and will reopen on June 17. The September-delivery contract climbed 1.8 percent to settle at 21,825 yuan ($3,195) a ton on June 11. 

(bloomberg.com)