Rubber Climbs to Two-Week High as Chinese Demand May Expand

By Aya Takada

July 29 (Bloomberg) -- Rubber advanced to a two-week high on speculation that demand in China, the world’s largest consumer, will keep growing after Sumitomo Rubber Industries Ltd. said it will expand tire output in the nation.

Futures in Tokyo climbed as much as 1.9 percent to the highest level since July 12. The price has gained 1 percent in July, heading for the first monthly advance since March.

Sumitomo Rubber, Japan’s second-largest tire maker after Bridgestone Corp., will invest $297 million to set up a factory in Hunan province, the company said in a statement yesterday. It will be the company’s second factory in China and start production in July 2012, it said.

“The news added to expectations that China’s raw-material demand will continue to grow, backed by a rapid expansion in the nation’s economy,” Hisaaki Tasaka, an analyst at broker ACE Koeki Co. in Tokyo, said today by phone.

January-delivery rubber increased as much as 5 yen to 273.6 yen per kilogram ($3,133 a metric ton) on the Tokyo Commodity Exchange before trading at 272 yen at 11:10 a.m. local time.

Gains in futures were limited as Asian stocks extended a global decline after the Federal Reserve said U.S. economic growth slowed in some areas, raising concern that the recovery of the world’s largest economy may weaken.

“Economic activity has continued to increase, on balance, since the previous survey,” the central bank said in its Beige Book business survey, noting that two of the Fed’s 12 districts reported the economy “held steady” and two said the pace of expansion slowed.

‘Unusually Uncertain’

The report underscored the Fed’s view that the recovery, while still moving forward, is progressing at a slower pace than earlier in the year. Fed Chairman Ben S. Bernanke said in congressional testimony last week that the central bank expects “continued moderate growth” and noted that the economic outlook remains “unusually uncertain.”

In the cash market, Thai prices advanced yesterday on speculation that heavy rains in the nation’s rubber-growing southern provinces may limit supply, according to the Rubber Research Institute of Thailand. The price added 0.2 percent to 102.4 baht ($3.18) per kilogram.

January-delivery rubber on the Shanghai Futures Exchange gained 0.9 percent to 23,525 yuan ($3,470) a ton.

(bloomberg.com)