Rubber, Little Changed, Set to Drop for Second Week on China Rate Concern

Rubber declined, booking a second weekly drop, as investor demand for the commodity weakened amid speculation that China may be preparing to raise a benchmark interest rate.

Futures in Tokyo extended losses for a fourth day after dropping to a two-week low yesterday on speculation that Chinese regulators were investigating large positions in natural rubber on the Shanghai Futures Exchange. China is the world’s largest consumer of the commodity used in tires.

China brought forward the release of August economic indicators by two days, spurring speculation the central bank may be preparing to raise a benchmark interest rate before markets open on Monday. Inflation may have accelerated to 3.5 percent in August, based on the median estimate of 31 economists in a Bloomberg News survey.

“Investors are cautious as China may take action to cool economic expansion,” Kazuhiko Saito, an analyst at Tokyo-based broker Fujitomi Co., said today by phone. “A higher interest rate could damp raw-material demand.”

February-delivery rubber fell 0.2 percent to settle at 293 yen per kilogram ($3,485 a metric ton) on the Tokyo Commodity Exchange. The price has lost 1.7 percent this week.

Shanghai Drops

January-delivery rubber on the Shanghai Futures Exchange dropped to 25,130 yuan ($3,714) a ton, the lowest level since Aug. 25, before settling at 25,380 yuan. Yesterday it slumped by the most in three months as the Securities Times reported regulators are investigating natural rubber positions, spurring concern that some traders may be forced to sell.

Before the price slumped yesterday, Shanghai futures climbed to 26,725 yuan, the highest level since July 2008, as accelerating growth in China’s car sales raised the outlook for demand from tire makers.

Global natural rubber consumption this year will exceed supply as a recovery in vehicle sales fuels demand for tires and as users rebuild inventory, the International Rubber Study Group said yesterday.

Demand will total 13.3 million tons this year, 114,000 tons higher than a previous forecast, the Singapore-based group said in an e-mailed statement. Production will increase 6.1 percent to 10.25 million tons this year and by 7.3 percent to 11 million tons in 2011, it said.

China’s passenger-car sales to dealerships grew at a faster pace in August as dealers offered discounts. Wholesale deliveries of passenger cars rose 18.7 percent to 1.02 million units in August, compared with 13.6 percent growth in July, the China Association of Automobile Manufacturers said yesterday. Deliveries surged 90 percent in August 2009 after government incentives bolstered demand.

(bloomberg.com)