Rubber Futures Advance to Record as China's Stocks Rally After Rate Rise

Rubber climbed to a record for a sixth day as higher oil prices boosted its appeal amid expectations a supply shortage may worsen early next year as top exporter Thailand enters a low-production period.

The June-delivery contract rallied as much as 0.7 percent to 419.3 yen per kilogram ($5,069 a metric ton) on the Tokyo Commodity Exchange before settling at 417.6 yen. The price has gained 51 percent this year after more than doubling in 2009.

Latex production in Thailand is set to shrink as growers will reduce tapping of rubber trees from February to April during the so-called “wintering” period. The seasonal drop in output may worsen a supply shortage as global demand will keep rising, led by car sales in China and India, said Kazuhiko Saito, an analyst at Tokyo-based broker Fujitomi Co.

“A bullish fundamental outlook spurred investor purchases,” Saito said by phone today. The market also advanced as a rally in copper and oil raised speculation that the economic recovery will boost demand for industrial commodities, he said.

The cash rubber price in Thailand climbed 0.3 percent to a record 149.55 baht per kilogram today, boosted by limited supply from the country’s southern provinces amid strong demand for tires, according to the Rubber Research Institute of Thailand.

Copper in New York advanced to a record after China raised interest rates for the second time since mid-October. Crude oil in New York gained to a two-month high on speculation China’s monetary tightening will sustain economic growth.

Interest Rates

China’s central bank boosted its benchmark one-year lending rate by 25 basis points to 5.81 percent, and the one-year deposit rate by the same amount to 2.75 percent.

“Gradual policy normalization now should help keep Chinese growth and commodity demand on a sustainable trajectory,” Brian Jackson, Hong Kong-based senior strategist at RBC Capital Markets, said in a note. “Across emerging Asian markets, growth has been solid and exports have been holding up well, so the policy focus needs to be on dealing with inflation.”

Premier Wen Jiabao’s government aims to limit asset bubbles in the real-estate market and prevent rising prices from leading to social unrest after flooding the economy with cash from late 2008 to drive an economic recovery.

China reported an inflation rate of 5.1 percent for November, the highest in 28 months. Exports last month reached a record $153.3 billion and the trade surplus exceeded $20 billion for the fifth time in sixth months, indicating a recovery in international trade from the global financial crisis.

May-delivery rubber in Shanghai lost 0.5 percent to 37,110 yuan ($5,596) a ton after earlier gaining as much as 1.3 percent to 37,800 yuan. It climbed to a record 38,920 yuan on Nov. 11.

(Source: http://www.bloomberg.com/news/2010-12-27/rubber-futures-advance-to-record-as-china-s-stocks-rally-after-rate-rise.html)