Rubber Retreats From Record as Investors Secure Gains, Crude Oil Declines

Rubber declined, ending a five-day winning streak, as falling crude oil prices prompted investors to sell the commodity to lock-in gains after it climbed to an all-time high yesterday. The cash price in Thailand, the top producer, remained at a record.

May-delivery rubber on the Tokyo Commodity Exchange dropped as much as 0.8 percent to 393.1 yen per kilogram (4,687 a metric ton) before settling at 393.7 yen. The price, which has surged 43 percent this year, climbed to the record 400.1 yen yesterday.

Oil dropped for a second day after an industry report showed U.S. fuel stockpiles rose last week and the Federal Reserve said the recovery in the world’s biggest crude user has been “disappointingly slow.”

“Investors took cues from declining crude oil prices to cash-in profits,” Sureerat Kunthongjun, an analyst at Agrow Enterprise Ltd., said by phone from Bangkok. “Fundamentals remain unchanged with tight supply supporting rubber,” she said.

Persistent rain in Thailand lowered latex output, adding to supply concerns ahead of the low-production season early next year. Farmers reduce tree-tapping during the so-called “wintering” season, which normally starts in February.

The cash price in Thailand remained a record 141.05 baht ($4.69) a kilogram today, boosted by limited supply, according to the Rubber Research Institute of Thailand.

Restocking Drive

“Bullish fundamentals will support rubber prices,” Hisaaki Tasaka, an analyst at Tokyo-based broker ACE Koeki Co., said today by phone. “Demand will expand on the global economic recovery, while supply will drop seasonally in coming months.”

Users must increase purchases for restocking before the low-production season starts, which will lead to a further increase in cash prices, Tasaka said.

Crude-rubber stockpiles held at Japanese warehouses fell 7.6 percent to 6,816 tons at the end of last month, according to data from the Rubber Trade Association of Japan.

The Federal Open Market Committee said its $600 billion of bond purchases are aimed at boosting a recovery that has been “disappointingly slow,” ahead of data today that may show industrial output rebounded. The Tankan index of sentiment at large manufacturers fell for the first time since March 2009, fueling concern Japan’s economy will contract this quarter.

Yokohama Rubber Co. will raise Japanese prices of truck and bus tires by an average of 7 percent from March 1 to reflect higher rubber costs, according to a statement today on the company’s website. Bridgestone Corp., the world’s largest tiremaker, said last week it would raise Japanese prices of truck and bus tires by an average of 7 percent in March.

May-delivery rubber in Shanghai lost 2.3 percent to close at 34,735 yuan ($5,216) a ton after rising as much as 0.6 percent earlier today. The contract climbed to a record 38,920 yuan on Nov. 11.

(Source: http://www.bloomberg.com/news/2010-12-15/rubber-may-advance-for-sixth-day-as-demand-may-expand-on-global-recovery.html)