Rubber Tumbles to Two-Week Low on Europe Debt Crisis, Oil Dip

By Supunnabul Suwannakij

June 7 (Bloomberg) -- Rubber tumbled to the lowest level in two weeks on concern the European debt crisis may slow the global economic recovery, weakening demand for the commodity used to make tires.

Futures in Tokyo plunged as much as 6.5 percent to 256 yen a kilogram ($2,809 a metric ton), the lowest level since May 21. The price fell 3.8 percent last week, the biggest drop since the week ended May 7, on increased output from Thailand and concern that Chinese demand may decline.

Crude oil dropped for a second day amid investor’s fear Europe’s debt crisis will widen and after the U.S. added fewer jobs than forecast last month, suggesting energy demand may be slow to recover. The euro fell to its weakest level since November 2001 versus the yen.

“The main factor for the sharp fall today is because of stronger yen, triggered by the euro collapse,” said Kazunori Kokubo, general manager for International Business Department of commodity broker Yutaka Shoji Ltd. “Other commodities, especially oil, also came down so sharply. That reflects concerns over impact of the Europe’s debt problems.”

Rubber for November delivery, the most-active contract, declined 16 yen, or 5.8 percent, to 257.9 yen per kilogram on the Tokyo Commodity Exchange as of 11:36 a.m. in Tokyo.

September-delivery rubber on the Shanghai Futures Exchange declined the 5 percent daily limit to 20,560 yuan ($3,011) a ton, the lowest level since Nov. 13, 2009.

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.

Thai Supplies

“Oil’s decline spilled over to the rubber market,” Chaiwat Muenmee, an analyst at broker DS Futures Co., said by phone from Bangkok. Rubber often tracks oil prices as the rival synthetic product is made from petroleum.

Crude oil for July delivery lost 2.4 percent to $69.83 a barrel in electronic trading on the New York Mercantile Exchange. The contract fell 4.2 percent on June 4 after the Labor Department said that payrolls rose by 431,000 in May. Economists projected a 536,000 gain, according to the median forecast in a Bloomberg News survey.

Cash prices of natural rubber in Thailand, the top exporter, may decline as production increases this month, the Thai Rubber Association said last week.

Production 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 June 2. Output this year may be 3.2 million tons, matching 2009, he said.

The free-on-board price of Thai RSS-3 grade rubber for July delivery, which excludes freight and insurance, dropped 1.6 percent June 4 to 119.65 baht ($3.66) a kilogram, the Rubber Institute of Thailand said on its website. The prices will be updated at about noon local time.

(bloomberg.com)