Rubber Set for First Drop in Three Weeks as Thai Output Gains

By Aya Takada

June 4 (Bloomberg) -- Rubber declined, set for the first weekly loss in three, on increased output from Thailand and concern that demand from China may weaken.

Futures in Tokyo dropped as much as 2.9 percent to the lowest level since May 24. The price has lost 5.6 percent this week, the worst performance since the week ended May 7.

Thai farmers have increased tapping of rubber trees after the low-production season ended, expanding global supply, said Shuji Sugata, research manager at Mitsubishi Corp. Futures Ltd. in Tokyo. China’s passenger-car sales growth slowed last month as falling stock prices eroded wealth.

“Investors were reluctant to buy rubber futures because of a seasonal increase in Thai supply and concern about Chinese demand,” Sugata said by phone today.

Rubber for November delivery, the most-active contract, fell as much as 7.8 yen to 265.7 yen per kilogram ($2,868 a metric ton) before trading at 268.7 yen on the Tokyo Commodity Exchange at 11:16 a.m. local time.

Cash prices of natural rubber in Thailand, the world’s largest exporter of the commodity, may decline as production increases this month, the Thai Rubber Association said.

Output may exceed 200,000 tons a month in June and July, as much as 30 percent more than the low-output period in April and May, the group’s President Luckchai Kittipol said this week. Output this year may be 3.2 million tons, matching 2009, he said.

Thai Prices

The free-on-board price of Thai RSS-3 grade rubber for July delivery, which excludes freight and insurance, fell 1 percent to 112.65 baht ($3.46) a kilogram yesterday, according to the Rubber Institute of Thailand.

China’s sales of cars, sport-utility vehicles and multipurpose vehicles rose 25 percent in May from a year earlier, compared with growth of 34 percent in April, the China Automotive Technology & Research Center said June 1.

A “diminishing wealth effect” from Chinese stock declines, 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.

September-delivery rubber on the Shanghai Futures Exchange lost 1.8 percent to 21,550 yuan ($3,156) a ton at 10:15 a.m. local time.

(bloomberg.com)