Rubber Retreats From One-Month High as Crude Oil's Decline Reduces Appeal

Rubber retreated from a one-month high as crude oil declined amid concern slower economic growth may curb demand, cutting the appeal of the commodity as an alternative to synthetic products.

Futures in Tokyo dropped as much as 3.2 percent to the lowest level in a week. The price climbed yesterday to 288.6 yen per kilogram (3,229 a metric ton), the highest level since May 28, as rainfall disrupted output in Thailand, the world’s biggest producer and exporter.

Crude oil declined from a seven-week high in New York on skepticism that production in the Gulf of Mexico will be disrupted by a tropical storm in the region. U.S. forecasters projected that Tropical Storm Alex will move across the southern Gulf and make landfall as a hurricane July 1 in Mexico.

“A drop in oil was the largest drag on the price of rubber,” Shuji Sugata, research manager at Mitsubishi Corp. Futures Ltd. in Tokyo, said today by phone. “An unclear outlook for global economies also sapped investor appetite for industrial commodities.”

Rubber for December delivery lost as much as 9.1 yen to 274.7 yen before trading at 277.4 yen on the Tokyo Commodity Exchange at 11:08 a.m. local time.

The price advanced yesterday as data showed stockpiles in China declined to the lowest level in seven years, sparking optimism that the world’s biggest buyer may soon replenish inventories.

Stockpiles Drop

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 the 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 lost 1.5 percent to 21,930 yuan ($3,226) a ton at 10:14 a.m. local time.

The benchmark price in Thailand was unchanged yesterday at 118.85 baht ($3.67) a kilogram, according to the Rubber Institute of Thailand. It will issue new data in the afternoon.

(bloomberg.com)