Rubber Gains to Record as Rain Curbs Thai Supply, U.S. Economy Accelerates

Rubber extended its rally to a record as rain curbed output in Thailand, the top exporter, and on speculation China may delay raising interest rates, helping demand. The cash Thai price surged to an all-time high.

May-delivery rubber climbed to as high as 412.8 yen a kilogram ($4,889 a metric ton) on the Tokyo Commodity Exchange before ending so-called night trading at 412.4 yen, according to intraday data on Bloomberg. Trading is settled on Tuesday. The most-active contract climbed 49 percent this year.

Persistent rains across Thailand, Indonesia and Malaysia, the top three producers, have disrupted tapping and lowered output as rising car sales in China and India boost demand. The supply shortage is expected to worsen as the low-production season starts in Thailand early next year, said Takaki Shigemoto, an analyst at research company JSC Corp. in Tokyo.

“The market looks bullish on declining supply,” Shigemoto said by phone today. “Futures also gained on speculation that China won’t raise interest rates this year.”

May-delivery rubber in Shanghai gained as much as 4.7 percent to 37,855 yuan ($5,677) a ton, the highest level since Nov. 11, when the price climbed to a record 38,920 yuan. The contract closed at 37,320 yuan.

The contract had dropped to a seven-week low of 29,500 yuan on Nov. 30 amid concern that China may increase interest rates to curb inflation, weakening demand from the largest consumer.

Inflation Easing

China’s stocks may rise until the Lunar New Year holiday in February, as inflation is likely to ease “significantly” in December because of declining vegetable prices, according to China International Capital Corp.

The cash rubber price in Thailand extended a rally to a record 144.05 baht ($4.77) per kilogram today, gaining 1.8 percent from Dec. 17, the Rubber Research Institute of Thailand said on its website today. Local and overseas buyers, in particular China, continue buying to build up inventories ahead of New Year holidays and the low-production season, it said.

“Unfavorable weather conditions prompted buyers from China, India and Japan to accelerate purchases to secure supplies,” Sureerat Kunthongjun, an analyst at Bangkok-based commodity broker Agrow Enterprise Ltd., said by phone.

The dollar advanced against the yen today before reports this week that economists say will show the U.S. gross domestic product expanded more than previously estimated and personal spending climbed. A weaker Japanese currency also raised the appeal of yen-denominated rubber contracts.

The U.S. economy expanded 2.8 percent in the third quarter from a year earlier, quicker than the 2.5 percent estimate published last month, the Commerce Department may say on Dec. 22, according to a Bloomberg News survey of economists. Spending by U.S. consumers rose 0.5 percent in November after a 0.4 percent increase in October, a separate Bloomberg survey showed before a Dec. 23 report.

(Source: http://www.bloomberg.com/news/2010-12-20/rubber-gains-to-record-as-rain-curbs-thai-supply-u-s-economy-accelerates.html)