Rubber Advances for Third Day as Ireland Seeks Bank Bailout, Tight Supply

Rubber advanced for a third day as the yen weakened against the euro amid optimism that an agreement to rescue Ireland’s banks will prevent contagion across European debt markets, while supply remained tight. The cash price in Thailand climbed to a record.

April-delivery rubber on the Tokyo Commodity Exchange climbed as much as 2.1 percent to 375.3 yen per kilogram ($4,500 a metric ton) before settling at 369.8 yen. The most-active contract has climbed 13 percent this month as heavy rain in Thailand, Indonesia and Malaysia, the top three growers, disrupted tapping and lowered production.

“Worries over the debt situation in Europe have eased, improving sentiment and raising optimism that demand for the commodity will grow,” said Chaiwat Muenmee, analyst at DS Futures Co. “The low supply level is also supportive,” he said.

Irish Prime Minister Brian Cowen said on Nov. 21 in Dublin that he expects talks on the details of financial assistance from the European Union and the International Monetary Fund for Ireland to be completed in the “next few weeks.” Finance Minister Brian Lenihan said the loan will be less than 100 billion euros ($137 billion).

The yen depreciated to 114.85 against the euro, compared with 113.65 at the close of stock trading in Tokyo on Nov. 19. A weaker yen improves the appeal of yen-denominated contracts.

Cash-Price Record

Investors are still concerned about tight supplies from Thailand, Indonesia and Malaysia, said Hiroyuki Kikukawa, general manager of research at Tokyo-based IDO Securities Co.

The cash price in Thailand, the largest exporter, climbed to a record 132.75 baht ($4.44) per kilogram today as floods devastated trees, lowering production in the country’s south, according to the Rubber Research Institute of Thailand. The southern provinces account for 68 percent of the country’s total plantation area.

May-delivery rubber on the Shanghai Futures Exchange declined as much as 3.5 percent to 33,200 yuan ($5,000) a ton before closing at 33,215 yuan.

“The upside is limited on concerns over China’s measures to fight inflation,” Chaiwat at DS Futures said.

China, the biggest buyer, ordered banks on Nov. 19 to set aside larger reserves for the second time in two weeks. The latest move to contain excess liquidity came after Premier Wen Jiabaoheld a Cabinet meeting earlier in the week and called for a crackdown on speculation in agricultural goods, saying price controls may be needed on “daily necessities.”

China’s natural-rubber inventories rose for an eighth consecutive week to a seven-month high, gaining 705 tons to 60,996 tons, based on a survey of 10 warehouses in Shanghai, Shandong, Yunnan, Hainan and Tianjin, the exchange said Nov. 19.

(Source: http://www.bloomberg.com/news/2010-11-22/rubber-advances-for-third-day-as-ireland-seeks-bank-bailout-tight-supply.html)