Rubber Declines as Oil’s Drop Cuts Appeal, Supply Increases

By Aya Takada

July 15 (Bloomberg) -- Rubber futures declined for a fourth day in five as a drop in oil reduced the appeal of the commodity as an alternative to synthetic products used in tires, and supply increased from Asian producing countries.

Futures in Tokyo decreased by as much as 1.3 percent, nearing a one-month low reached yesterday. The price pared losses as Shanghai’s rubber market climbed after data showed China’s economy expanded 11.1 percent in the first half.

Crude oil declined, cutting the cost of making rival synthetic rubber, after the Federal Reserve’s assessment that the economic outlook has “softened” added to concerns a recovery in demand may falter. Rubber futures were also capped by speculation supply from Southeast Asia will climb after data showed Malaysia’s output grew 20 percent.

“Rubber was curbed by uncertainty about economic outlook and seasonal increase in production,” Hisaaki Tasaka, an analyst at broker ACE Koeki Co. in Tokyo, said today by phone.

December-delivery rubber fell as much as 3.4 yen to 260.8 yen per kilogram ($2,955 a metric ton) before trading at 263.3 yen on the Tokyo Commodity Exchange at 11:49 a.m.

November-delivery rubber on the Shanghai Futures Exchange added 1 percent to 21,420 yuan ($3,161) a ton at 11:04 a.m. local time.

China Growth

China’s economic growth eased to 10.3 percent in the second quarter after the government succeeded in tempering credit expansion, investment spending and property speculation.

The pace compares with an 11.9 percent gain in January- March from a year earlier. Inflation cooled to 2.9 percent in June, the statistics bureau also reported in Beijing today. Industrial output rose a less-than-estimated 13.7 percent.

“The growth data from China, even though showing a slowdown in expansion, looks much better than developed economies,” Tasaka at ACE Koeki said.

The Federal Reserve cut its central forecast for growth this year to a range of 3 to 3.5 percent from 3.2 to 3.7 percent, and sales at U.S. retailers dropped for a second month, falling more than economists estimated.

Federal Reserve officials saw no need to boost stimulus to the economy while trimming their forecasts for growth and noting that risks to the recovery had increased, minutes of their June meeting showed.

“The economic outlook had softened somewhat and a number of members saw the risks to the outlook as having shifted to the downside,” minutes released yesterday in Washington said.

Malaysia’s natural rubber output reached 65,254 tons in May, rising 20 percent from April, data from the nation’s Department of Statistics showed yesterday. 

(bloomberg.com)