Jan. 26 (Bloomberg) -- Rubber slumped by the most in more than two months on speculation that record prices are spurring producers to increase output and as China may take additional steps to curb inflation, curbing demand.
The June-delivery contract dropped as much as 4.9 percent to 453.1 yen a kilogram ($5,519 a metric ton) on the Tokyo Commodity Exchange, the most since Nov. 12. The July-delivery contract, listed on the bourse today, traded at 452.4 yen after opening at 460.2 yen.
Futures extended declines from a record of 484.9 yen reached on Jan. 24. Rubber supply may expand 4.8 percent this year as planting area increases and high prices prompt farmers to continue tapping into the low-production season, boosting supply in February, according to the Association of Natural Rubber Producing Countries. China, the world’s largest consumer, may raise interest rates before the Lunar New Year holiday, said Hisaaki Tasaka, an analyst at ACE Koeki Co. in Tokyo.
“Concern about China’s rate increase dragged the market down,” Tasaka said by phone today. “Investors with long positions are eager to take profits before the Chinese New Year holiday starts next week.” The week-long holiday starts Feb. 2.
The January-delivery contract on the Tokyo exchange expired yesterday at 478.2 yen a kilogram, the highest-ever price, the bourse said in a statement. At its expiry, 1,570 tons of physical rubber was delivered, it said.
“The volume of delivery was more than I had expected,” Tasaka said. “Supply may not be so tight.”
Tapping Continues
Rubber production by members of the Association of Natural Rubber Producing Countries may total about 9.9 million tons this year, the group said in a monthly bulletin yesterday. The countries represent 92 percent of global supply.
Supply in February from the group members could be above average as higher prices motivate farmers to continue tapping until the end of February, it said. Growers typically reduce tapping during the leaf-shedding season that begins next month.
Output in January is expected to rise 2.9 percent to 866,000 tons, slower than 13.5 percent growth in the same period last year, the group said.
Production in Thailand, the world’s largest supplier, may rise 5.4 percent to 3.25 million tons this year, the association said, citing a government target. Indonesia is expected to produce 3.08 million tons, an 8.1 percent increase. Output from Malaysia may grow 8.2 percent to 1.05 million tons, the report said, citing government targets.
Chinese Demand
Rubber in Tokyo has gained 9.9 percent this month, extending last year’s 50 percent rally, as rising car sales led by China and India boost the demand outlook. China’s vehicle sales may grow 10 percent to 15 percent this year after jumping 32 percent to 18.06 million vehicles in 2010, according to a forecast by the China Association of Automobile Manufacturers.
In Shanghai, the May-delivery contract dropped as much as 3.2 percent to 38,410 yuan ($5,831) a ton, the lowest level in a week. It was at 38,600 yuan at the 11:30 a.m. local time break.
The cash price in Thailand dropped to 178.05 baht ($5.77) a kilogram, the Rubber Research Institute of Thailand said on its website today. The price climbed to a record 181.55 baht yesterday as some plantation areas in northeastern provinces of the country have already entered the low-output season, according to the institute.
(Source: http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aqLlw8JwrTQY)
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