Rubber Plunges to Two-Week Low on Worries Over Weak Demand

By Aya Takada and Supunnabul Suwannakij

June 30 (Bloomberg) -- Rubber tumbled for a third day to more than two-week low on concern that demand for the commodity may weaken amid slow economic growth in China and the U.S.

December-delivery futures declined as much as 2.9 percent to at 266.5 yen ($3,011 a metric ton) on the Tokyo Commodity Exchange, the lowest since June 14. Prices are set for the first quarterly decline since the end of 2008.

Crude oil dropped for a third day on concern over weakening economic expansion in China and as confidence waned more than forecast among consumers in the U.S. Worries over the pace of global economic recovery still pressure market sentiment, said Felix Yeo, trading manager at the Singapore unit of Marubeni Corp. A decline in oil prices also dragged the rubber price lower, he added.

The Conference Board said yesterday its leading economic index for China climbed more slowly in April than previously estimated. The board’s U.S. confidence index in June was lower than all forecasts in a Bloomberg News survey. The Standard & Poor’s 500 Index dropped to its lowest level since October.

The December delivery contract fell 2.2 percent to 268.3 yen a kilogram as of 10:57 a.m. in Tokyo. The price advanced yesterday to 285.2 yen, the highest level since May 28, as rain disrupted output in Thailand, the biggest producer and exporter.

‘Downside Limited’

“The downside is limited as Japan and China have low inventories,” said Yeo. “Raw materials are still tight and that will easily push up the market again.”

Inventories in China declined to the lowest level in seven years, sparking optimism that the world’s biggest buyer may soon replenish inventories, data showed. Natural rubber stockpiles monitored by the Shanghai Futures Exchange dropped 1,670 tons to 14,771 tons, the bourse said on June 25. It was the lowest level since January 2003, according to Bloomberg data.

China, the largest auto market, is the biggest consumer of natural rubber. The nation may increase gross imports of the raw material to 1.68 million tons this year, from 1.59 million in 2009, according to a May report from the Association of Natural Rubber Producing Countries.

November-delivery rubber on the Shanghai Futures Exchange dropped 0.5 percent to 21,475 yuan ($3,162) a ton at 11:30 a.m. local time break.

Cash prices in Thailand declined as Chinese buyers have shifted to purchasing cheaper rubber from Indonesia, the Rubber Institute of Thailand said on its website yesterday. The Thai benchmark price dropped 0.6 percent yesterday to 118.10 baht ($3.67) a kilogram, it said. Price will be updated in the afternoon.

(bloomberg.com)