Rubber Advances for First Time in Three Days on Weaker Yen, Low Supplies

Rubber in Tokyo rebounded after a two-day slump, as the Japanese yen weakened to a six-week low versus the dollar amid low supply from the top three producers.

April-delivery rubber on the Tokyo Commodity Exchange surged as much as 2.8 percent to 363.6 yen per kilogram ($4,377 a metric ton) before trading at 361.3 yen at 12:40 p.m. local time. The contract fell 6.7 percent in the past two days after climbing to a 30-year high. The May-delivery contract in Shanghai advanced by as much as 4.2 percent to 35,170 yuan ($5,295) a ton after tumbling 11 percent in the past three days.

“The weakening yen helped improve market sentiment,” Chaiwat Muenmee, an analyst at DS Futures Co., said today by phone from Bangkok. “Fundamentally, low supply from Thailand, Indonesia and Malaysia remains price supportive.”

Futures in Tokyo have gained 31 percent this year as producers have had difficulty catching up with growing demand because of rain and flooding that disrupted latex output in Southeast Asia.

Natural-rubber output in Thailand may decline by 10 percent to 870,000 tons in the fourth quarter, reducing total production this year by 5 percent to 3 million tons, according to an estimate by the Thai Rubber Association. Annual supply may fall by 50,000 tons over the next seven years until new trees mature, association President Luckchai Kittipol said on Nov. 10.

The cash price in Thailand, the largest producer and exporter, was unchanged today at 131 baht ($4.39) per kilogram after climbing to a record of 132 baht on Nov. 12, according to the Rubber Research Institute of Thailand. The price is likely to rise as rain across the country’s south, the main rubber plantation area, will continue to limit supply, it said.

Low Stockpiles

Low stockpiles in Japan and China mean that buyers will continue purchases, said Chaiwat of DS Futures. Stockpiles held at Japanese warehouses fell 2.8 percent to 7,552 tons on Nov. 10, data from the Rubber Trade Association of Japan showed today.

China’s inventories increased 10,735 tons last week to 60,291 tons, based on a survey of 10 warehouses in Shanghai, Shandong, Yunnan, Hainan and Tianjin, the Shanghai Futures Exchange said Nov. 12. That is a 60 percent decline from this year’s high of 151,832 tons.

The Japanese currency traded near a six-week low against the dollar before a report that economists said will show U.S. industrial production expanded last month, adding to signs the nation’s recovery is gathering pace.

U.S. industrial production increased 0.3 percent last month after dropping 0.2 percent in September, according to a Bloomberg News survey before today’s report. Retail sales rose 1.2 percent in October, the most in seven months, Commerce Department data showed yesterday.

The yen traded at 83.12 per dollar after falling to 83.27 yesterday, the lowest level since Oct. 6. A weaker Japanese currency improves the appeal of yen-based contracts.

(Source: http://www.bloomberg.com/news/2010-11-16/rubber-advances-for-first-time-in-three-days-on-weaker-yen-low-supplies.html)