Rubber Drops, Posts First Loss in Six Weeks, on Chinese Demand Concerns

Rubber decreased for a third day, booking the first loss in six weeks amid concern that demand from China may weaken after the world’s biggest consumer raised interest rates and its economy expanded at a slower pace.

The most-active contract on the Tokyo Commodity Exchange lost as much as 1.2 percent to 330.5 yen per kilogram ($4,071 a metric ton) before settling at 333.8 yen. It lost 1.8 percent this week after setting a 27-month high of 343 yen Oct. 15.

China’s first increase in interest rates since 2007 stoked speculation that the fastest-growing major economy may take additional steps to curb inflation and prevent asset-price bubbles, said Takaki Shigemoto, an analyst at JSC Corp. in Tokyo. The nation’s inflation accelerated in September to the fastest pace in 23 months.

“The rubber market was capped by concern that higher Chinese rates may have a negative impact on consumption, especially car sales,” Shigemoto said by phone today.

March-delivery rubber on the Shanghai Futures Exchange lost 0.6 percent to 31,000 yuan ($4,657) a ton, declining 3.3 this week. It climbed to a record 33,000 yuan on Oct. 19.

China’s central bank raised the benchmark one-year lending rate to 5.56 percent from 5.31 percent and the deposit rate to 2.5 percent from 2.25 percent on Oct. 19.

Natural-rubber imports by China jumped 19 percent from a month earlier to 190,000 tons in September as the country’s passenger-car sales to dealerships quickened from August on additional incentives for buyers.

Wholesale deliveries of passenger cars rose 19.3 percent to 1.21 million, accelerating from 18.7 percent in August, the China Association of Automobile Manufacturers said Oct. 12.

Declines Limited

Losses in rubber futures were limited by concern that wet weather in Asian producing countries may limit supplies, Shigemoto said. Central, northern and northeastern provinces in Thailand, the world’s largest producer, were affected by floods and rainfall across the country, the government said.

Heavy rains and flash floods inundated 24 provinces since the beginning of October, damaging 1.7 million rai (0.7 million acres) of farmland, according to Farm Minister Theera Wongsamut. The ministry will assess the damage after the waters recede, he said in a statement.

A severe drought in Yunnan at the beginning of this year and torrential rains this month in Hainan, the top two producing areas in China, will reduce domestic rubber output, according to Guo Cheng, an analyst at Yongan Futures Co.

Bridgestone Corp., the world’s largest tire maker by sales, expects total sales to rise 40 percent by 2015 from 2009, while overall industrywide demand will rise by 15 percent in the same period, it said in a press release today.

The Tokyo-based company also announced earlier today that it will invest 24 billion yen to increase production capacity for large tires and steel cords for vehicles used by construction and mining companies.

The company may raise products prices to pass on higher raw material costs, CFO Akihiro Eto told reporters today.

(bloomberg.com)