Rubber Drops for Third Day on China Demand Concern, Thai Supply

By Supunnabul Suwannakij

July 13 (Bloomberg) -- Rubber tumbled for a third day to the lowest level in more than a month on concern that slower car sales growth in China may signal weaker demand, while supplies from Thailand increased.

Futures in Tokyo declined as much as 2 percent to the lowest level since June 10. The price dropped 3.9 percent in the past two sessions after data showed car sales growth in China slowed, raising concern that consumption may weaken in the largest consumer of the commodity used to make tires.

“The market was following yesterday’s sentiment, pressured by slow car sales growth in China,” Kazunori Kokubo, general manager of the international business department at commodity broker Yutaka Shoji Co., said by phone from Tokyo.

Sales of cars, sport-utility vehicles and multipurpose vehicles in China, the largest auto market, expanded 19 percent from a year earlier to 1.04 million units last month, the China Association of Automobile Manufacturers said on July 9. That was the slowest pace since March 2009.

December-delivery rubber lost as much as 5.4 yen to 260.1 yen per kilogram ($2,932 a metric ton) before trading at 262.4 yen on the Tokyo Commodity Exchange at 11:30 a.m. local time. Still, prices have gained 71 percent over the past year.

November-delivery rubber on the Shanghai Futures Exchange lost 2.2 percent to 21,325 yuan ($3,147) a ton.

Car Sales

China’s passenger-car sales have risen every month since February 2009 after the government halved the consumption tax on small vehicles to 5 percent the preceding month as part of a stimulus package. Vehicle demand surged 46 percent to 13.6 million units last year, surpassing the U.S. for the first time.

The small-car sales tax was raised to 7.5 percent this year, and June was the third straight month of slowing demand. Monthly sales may decline from year-earlier levels during the second half of 2010, Credit Suisse Group AG analysts Adrian Chan and Hung Bin Toh wrote in a report on May 26.

“Improved supply from southern Thailand, amid an absence of orders from China, also damped market sentiment,” said Chaiwat Muenmee, an analyst at Bangkok-based commodity broker DS Futures Co. An average of 300 metric tons a day of ribbed smoked sheet was traded in Thailand’s southern markets this month, compared with more than 100 tons a day last month, Chaiwat said.

In the cash market, the Thai benchmark price dropped 0.4 percent to 112.35 baht ($3.47) per kilogram yesterday, according to the Rubber Institute of Thailand.

China’s natural-rubber inventories rose 3,429 tons to 19,411 tons, the bourse said on July 9, based on a weekly survey of 10 warehouses. It was the second straight increase after reaching the lowest level since January 2003.

(bloomberg.com)