Rubber Drops as Demand May Weaken After China Car Sales Slow

By Aya Takada

June 2 (Bloomberg) -- Rubber declined for a second day as a slowdown in China’s car sales stoked concern that demand may drop from the biggest consumer of the commodity used in tires.

Futures in Tokyo lost as much as 2.8 percent to the lowest level since May 27 also after data showed yesterday manufacturing growth in China and the euro region weakened in May, stoking speculation the economic rebound may be slowing.

China’s passenger-car sales growth slowed last month as falling stock prices eroded wealth and consumer prices rose in the world’s largest automobile market. The Shanghai Composite Index fell 9.7 percent in May as Chinese stocks remained among Asia’s worst performers this year.

“The market is weighed down by concern about the global economic recovery as data from China showed a slowdown in growth,” Hisaaki Tasaka, an analyst at Tokyo-based broker ACE Koeki Co., said today by phone. “Rubber may extend losses in tandem with other industrial materials.”

Rubber for November delivery, the most-active contract, fell as much as 7.8 yen to 274.4 yen per kilogram ($2,994 a metric ton) before trading at 277.3 yen on the Tokyo Commodity Exchange at 11:33 a.m.

China’s sales of cars, sport-utility vehicles and multipurpose vehicles rose 25 percent from a year earlier to 885,800 last month, the China Automotive Technology & Research Center said yesterday. That compares with 34 percent growth in April, according to the center. The data came out after the Tokyo exchange closed yesterday.

‘Diminishing Wealth’

A “diminishing wealth effect” from Chinese stocks, along with high gasoline prices, may contribute to a slowdown in auto sales, Credit Suisse Group AG analysts Adrian Chan and Hung Bin Toh wrote in a report last week. Vehicle sales could decline from year-earlier levels in the second half of 2010, they said.

Losses in rubber futures were limited as the yen dropped after Prime Minister Yukio Hatoyama told lawmakers he would resign, damping the allure of the currency as a haven. A weaker Japanese currency raises the appeal of yen-based contracts for the commodity traded globally in dollars.

The yen slid to 91.63 per dollar from 90.94 yesterday in New York. Ichiro Ozawa, the ruling party’s No. 2 official, will also step down, Hatoyama said today.

September-delivery rubber on the Shanghai Futures Exchange lost 1.6 percent to 22,210 yuan ($3,252) a ton.

(bloomberg.com)