Rubber slumped on concern that China may tighten trading rules to curb excessive speculation, and as a stronger dollar reduced the appeal of commodities as alternative assets.
The April-delivery contract declined as much as 1.4 percent to 335.7 yen per kilogram ($4,107 a metric ton) on the Tokyo Commodity Exchange before settling at 337 yen. Shanghai futures plunged as much as 4.4 percent to 31,210 yuan ($4,669) a ton after reaching a record 33,320 yuan yesterday.
Commodities in China snapped a rally as the Zhengzhou Commodity Exchange yesterday increased the margin requirement for rice, rapeseed oil, wheat and sugar trading to 8 percent from 3 percent or 4 percent. The exchange will track “abnormal” trading and recommend investigation by watchdogs, a separate statement dated Oct. 25 said.
“Rubber came under pressure amid speculation that China may be attempting to cap raw materials prices to curb inflation,” Shuji Sugata, research manager at Mitsubishi Corp. Futures Ltd. in Tokyo, said today by phone.
China’s increased liquidity after the financial crisis and government curbs on property investments have stoked commodity prices. In the past six months, cotton in Zhengzhou returned 61 percent, rubber in Shanghai gained 34 percent, zinc in Shanghai rose 9.2 percent, while Dalian soybean oil rose 20 percent.
“The government has had to battle anything from speculation in mung beans to garlic in the past and has shown increasing signs of wanting to intervene in futures,” Tommy Xiao, analyst at Shanghai JC Intelligence Co., said by phone from Shanghai. “But it’s like the game Whack-A-Mole: as they knock down one product, another one pops up.”
Dollar Strength
Rubber futures also declined because of a strengthening dollar, said Chaiwat Muenmee, analyst at commodity broker D.S. Futures. The dollar rose to a one-week high against the euro amid speculation more debt purchases by the Federal Reserve will help revive economic growth.
The dollar gained as high as $1.3771 per euro, the most since Oct. 20, before trading at $1.3793 at 4:44 p.m. in Tokyo.
The U.S. economy probably grew at a faster pace in the third quarter. Gross domestic product rose at a 2 percent annual pace, up from a 1.7 percent rate in the previous three months, according to the median forecast of economists surveyed by Bloomberg News before the Oct. 29 Commerce Department report.
The rubber cash price in Thailand gained 0.2 percent to 120.55 baht ($4.02) per kilogram today, boosted by worries that increasing rains in Thailand’s southern provinces will lower production amid persistent demand from processors, the Rubber Research Institute of Thailand said on its website. Prices will likely advance in the short term, the institute said.
Losses Limited
Rubber losses may be limited as reports on tightening supply should support prices, Chaiwat at D.S. Futures said. Rain continues to disrupt tapping among key producers, he said.
A natural rubber supply shortage will likely “worsen” in the fourth quarter as unseasonal rainfall continues to disrupt production from key growers, the Association of Natural Rubber Producing Countries said.
Output in Thailand, the largest producer and exporter, is estimated to fall 3.9 percent in the fourth quarter to 933,000 tons, the group said in a monthly bulletin.
Output in China and India is expected to contract during October to December because of heavy rain, the group said. India has scaled down its production forecast this year to 844,000 tons from 879,000 tons estimated earlier, while China cut its 2010 output forecast to 641,000 tons, a decline of 0.3 percent from the previous year, the group said.
Global rubber production this year is unlikely to increase more than 5.3 percent to 9.4 million tons, from a previous forecast of 6.3 percent, the association said. A further cut in output is expected because of tapping disruptions in Malaysia, Thailand and India, the group said.
“Marked change in supply scenario is remote in 2011 given the fact that yielding area is unlikely to expand before 2012,” Jom Jacob, the group’s senior economist, said in the statement.
(bloomberg.com)
