Rubber Drops a Second Day on Speculation Physical Deliveries May Increase

By Aya Takada and Supunnabul Suwannakij - Sep 16, 2010 3:16 PM GMT+0700

Rubber dropped for a second day, led by a slump in the nearest-dated contract, amid speculation that physical deliveries may increase when the contract expires next week.

September-delivery rubber on the Tokyo Commodity Exchange, which will expire on Sept. 24, plunged as much as 4.7 percent to 284 yen per kilogram ($3,324 a metric ton), extending yesterday’s 1.8 percent drop, before settling at 289.5 yen.

Investors sold the contract amid speculation that as much as 2,570 tons of rubber may be delivered when it expires, said Takaki Shigemoto, an analyst at JSC Corp. in Tokyo. The volume could more than double from 1,080 tons of physical delivery at the spot contract’s expiry last month, according to Norikazu Takei, a Tocom spokesman.

“The market was weighed down by concern that a larger volume of rubber deliveries may depress prices,” Shigemoto said by phone today.

February-delivery rubber, the most-active contract on the Tokyo exchange, lost as much as 1.3 percent to 292 yen per kilogram before settling at 292.8 yen.

Futures also declined as crude oil dropped, weakening the appeal of natural rubber as an alternative to synthetic products used in tires. Oil fell for a third day in New York after a U.S. government report showed fuel demand declined last week and as Enbridge Energy Partners LP prepared to restart a pipeline after repairs, easing supply concerns.

Crude for October delivery fell as much as 1.3 percent to $75 a barrel in electronic trading on the New York Mercantile Exchange in Asia.

Weak Data

Worse-than-expected economic data in the U.S. renewed concerns that the world’s largest economy may slow, hurting demand for raw materials, Shigemoto said.

Industrial production in the U.S. cooled in August to 0.2 percent after a 0.6 percent gain in July that was smaller than previously estimated, figures from the Federal Reserve showed. A separate report showed manufacturing in the New York region expanded this month at the slowest pace in more than a year.

March-delivery rubber on the Shanghai Futures Exchange dropped 0.5 percent to close at 25,170 yuan ($3,740) a ton.

Auctioned prices in Thailand declined as a strengthening local currency made the commodity more expensive for overseas buyers, according to the Rubber Research Institute of Thailand. Price of ribbed smoked sheets dropped 0.5 percent to 104.50 baht ($3.39) per kilogram, it said.

(bloomberg.com)