Rubber Futures Jump as China's Physical Demand, Weaker Yen Boost Appeal

Rubber climbed for the first time in five days as buying demand from China, a weaker Japanese currency and crude oil gains enhanced the appeal of the commodity used to make tires.

Rubber futures surged as much as 2.8 percent after retreating to one-week low yesterday. The January-delivery contract gained as much as 7.9 yen to 294.2 yen per kilogram ($3,475 a metric ton) on the Tokyo Commodity Exchange, before trading at 293.7 yen at 11:17 a.m.

“Physical buying coming from China gives the strength to the market,” Felix Yeo, trading manager at the Singapore unit of Marubeni Corp., said by phone today. Rising oil prices and a weakening yen also provide the support, he said.

The Japanese currency weakened for a second day against the dollar and the euro amid speculation policy makers will take measures to curb an advance. The yen fell to 84.89 per dollar in Asia, from 84.58 in New York yesterday.

Crude oil rose for a second day as U.S. equities climbed yesterday after a report that sales of new homes dropped in July to the lowest level on record. Rising oil prices improve rubber’s competitiveness against its synthetic rival.

China’s natural rubber inventories expanded for a fourth week, growing by 2,858 tons to 24,733 tons, based on a survey of 10 warehouses in Shanghai, Shandong, Yunnan, Hainan and Tianjin, the Shanghai Futures Exchange said Aug. 20.

The country is expected to import 135,000 tons of natural rubber in August and another 130,000 tons in September, the Association of Natural Rubber Producing Countries said in its newsletter this month. China’s gross imports this year may rise 5 percent to 1.67 million tons, the association said.

Rains Disrupt

“Thailand and Malaysia have been affected by some rains, raising supply concern,” Yeo said from Singapore. Rainfall disrupts tapping, lowering rubber output.

Heavy rainfall is likely across Thailand until the end of August, the Thai Meteorological Department said on its website.

In the cash market, Thai rubber prices fell 0.7 percent to 104.8 baht ($3.33) per kilogram yesterday, the Rubber Research Institute of Thailand said on its website. Supply availability remains limited because of persistent rainfall in rubber plantation areas, it said yesterday.

January-delivery rubber on the Shanghai Futures Exchange advanced 1.6 percent to 25,235 yuan ($3,710) a ton.

(bloomberg.com)