Rubber Drops as Europe Debt Concerns, Oil Decline Curb Appeal

By Supunnabul Suwannakij

June 15 (Bloomberg) -- Rubber declined for the first time in four days as falling crude oil prices and concern that the European debt crisis may reduce the appeal of the commodity used to make tires.

Futures in Tokyo dropped as much as 0.9 percent, after advancing 5.6 percent in the past three sessions, as Greece’s credit rating was downgraded yesterday, increasing concerns that the global economic recovery may slow.

Crude oil fell in New York after Moody’s Investors Service cut Greece’s government bond ratings to non-investment grade, or junk, threatening to further undermine demand for the nation’s assets as it struggles to contain its budget deficit. Asian equities fell for the first time in four days.

“The rubber market is adjusting to weakness in oil and stocks,” said Felix Yeo, a trading manager at the Singapore unit of Marubeni Corp.

Rubber for November dropped as much as 2.5 yen to 272.3 yen a kilogram ($2,974 a metric ton) before trading at 273.3 yen on the Tokyo Commodity Exchange at 11:34 a.m. local time. The contract yesterday settled at 274.8 yen, the highest closing price since June 1.

Crude oil for July delivery fell as much as 0.5 percent to $74.74 a barrel on the New York Mercantile Exchange before trading at $75.11. The MSCI Asia-Pacific index of stocks declined as much as 0.3 percent.

Still, losses in rubber futures may be limited by the low level of stockpiles, especially in China, and limited supply to meet growing demand, Yeo said.

Demand ‘Steady’

“Demand looks steady but there is tightness of supply somewhere as raw material prices are still high and consumers are still buying,” Yeo said. “Supplies have improved but whether it can keep up with demand or not is another question.”

Natural-rubber inventories monitored by the Shanghai exchange were 17,881 tons, based on a survey of 10 warehouses in Shanghai, Shandong, Yunnan, Hainan and Tianjin, the bourse said on June 11. That compares with 151,832 tons on Jan. 21, the highest level since November 2004, according to data compiled by Bloomberg.

The Shanghai Futures Exchange is closed today for a holiday, and will reopen on June 17. The September-delivery contract settled at 21,825 yuan ($3,194) a ton on June 11.

Cash prices in Thailand advanced yesterday, driven by demand from local tire manufactures, as the domestic automotive sector is expected to remain robust until the third quarter, the Rubber Institute of Thailand said on its website.

The free-on-board price of RSS-3 grade for July delivery gained 0.4 percent to 114.35 baht ($3.53) a kilogram yesterday, the institute said. It reviews the price daily and issues new data in the afternoon.

(bloomberg.com)