Rubber Declines as Strong Yen, Demand Concerns Reduce Appeal

Aug. 16 (Bloomberg) -- Rubber declined as the Japanese currency strengthened and on concern that demand for the commodity used to make auto tires may weaken.

January-delivery rubber in Tokyo fell as much as 1.3 percent to 277.2 yen a kilogram ($3,226 a metric ton) before settling at 280 yen. The contract lost 0.5 percent last week, the first weekly drop in four.

“The dollar is weakening against the yen so sentiment isn’t so strong today,” Roka Komiya, rubber trader at Marubeni Corp. in Singapore, said today. Investors are also concerned that the global economic recovery may be slowing, reducing demand for rubber, he said.

The yen rose against all of its major counterparts after a report showed Japan’s gross domestic product grew at a slower- than-expected pace and before data forecast to show German investor confidence fell.

Japan’s GDP expanded at an annualized 0.4 percent rate in the three months to June 30, according to government data today. That compares with the median economist estimate for 2.3 percent growth in a Bloomberg News survey.

“Weaker-than-expected GDP in Japan and lower-than-expected U.S. retail sales pressured market sentiment,” Varut Rungkhum, an analyst at Agro Wealth Ltd., said today by phone from Bangkok.

Purchases at U.S. retailers in July climbed 0.4 percent, figures from the Commerce Department in Washington showed Aug. 13, compared with a 0.5 percent median increase forecast by economists in a Bloomberg News survey. Excluding auto dealers and gasoline stations, sales dropped 0.1 percent, the second decline in three months.

Stockpiles Increased

Rubber stockpiles in Japan expanded to 3,275 tons as of July 31 from a record low of 2,628 tons on July 20, according to Rubber Trade Association of Japan data.

Natural rubber inventories in China expanded for a third week by 1,667 tons to 21,875 tons, based on a survey of 10 warehouses in Shanghai, Shandong, Yunnan, Hainan and Tianjin, the Shanghai Futures Exchange said Aug. 13.

“Higher stockpiles reflected improved car sales in China, which will help cushion any downside in the market today,” Agro Wealth’s Varut said.

China’s auto sales may rise to 16 million this year, the China Association of Automobile Manufacturers said Aug. 10, boosting its forecast from a previous estimate of 15 million. China’s passenger-car sales rose 13.6 percent to 946,200 in July, the association said.

January-delivery rubber in Shanghai declined 0.4 percent to close at 24,750 yuan ($3,639 a ton).

The benchmark Thai rubber price was unchanged at 104.50 baht ($3.28) per kilogram, according to the Rubber Research Institute of Thailand. The strengthening yen and Thai baht and concerns that the global economy is slowing were offset by limited supply as rainfalls in Thailand’s southern provinces have disrupted tapping, it said. 

(bloomberg.com)