Rubber Futures Advance to a Record as U.S. Economy Improves, Yen Weakens

Rubber extended its rally to a record for a third day after data showed improvement in the U.S. economy, boosting expectations demand will expand for the commodity used in tires amid tightening supplies.

June-delivery rubber gained as much as 2.5 percent to 438.8 yen per kilogram ($5,267 a metric ton) before trading at 436.8 yen on the Tokyo Commodity Exchange at 12:18 p.m. local time. The most-active contract has increased 5.4 percent this week, extending last year’s advance of 50 percent.

Japanese stocks climbed and the yen weakened against the dollar after higher-than-estimated growth in U.S. payrolls and service industries bolstered optimism in the world’s largest economy. The data also boosted oil prices above $90 a barrel, raising the appeal of natural rubber as an alternative to synthetic products made from petroleum.

“Strong U.S. data and a weakening yen support the rally of rubber to a new high,” Ker Chung Yang, an analyst with Phillip Futures Pte, said by phone from Singapore. “Stockpiles in Japan have depleted raising concerns of supply shortage,” he said.

Crude rubber stockpiles held at Japanese warehouses fell 2.7 percent to 6,316 tons on Dec. 20, according to data from the Rubber Trade Association of Japan.

China’s natural-rubber inventories were at 66,515 tons, based on a survey of 10 warehouses in Shanghai, Shandong, Yunnan, Hainan and Tianjin, the Shanghai Futures Exchange said Dec. 31. That was 56 percent lower than last year’s high of 151,832 tons.

“Tight fundamentals continue to boost rubber futures,” said Kazunori Kokubo, general manager at the international business section of commodity broker Yutaka Shoji Co. in Tokyo. “I don’t see any factors to sell them at the moment as buyers keep purchasing the commodity, regardless of the price rally.”

Supply Limited

Supply from Thailand, the world’s largest producer and exporter, is set to decline as the nation enters a low- production period next month.

Growers in Thailand will reduce tapping 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.

The Thai cash price extended a rally to a record 158.05 baht ($5.22) per kilogram as persistent rain in southern provinces lowered production amid strong demand ahead of Chinese New Year holidays and the low-production period, according to the Rubber Research Institute of Thailand.

U.S. Growth

The U.S. Institute for Supply Management said yesterday that its non-factory index, which covers about 90 percent of the economy, rose to 57.1 in December, exceeding the median forecast of economists surveyed by Bloomberg News and the fastest expansion since May 2006.

ADP Employer Services said yesterday that U.S. companies added 297,000 jobs last month, almost triple the median economist estimate.

The dollar gained the most in three months against the yen yesterday in New York, advancing to as much as 83.38, the highest level since Dec. 23. A weaker Japanese currency raises the appeal of yen-denominated contracts as rubber trades globally in the dollar.

Rubber futures in Shanghai gained as much as 2 percent to the highest level since Nov. 11. May-delivery rubber rose to 38,850 yuan per ton before trading at 38,350 yuan at 11:17 a.m. local time.

(Source: http://www.bloomberg.com/news/2011-01-06/rubber-futures-advance-to-a-record-as-u-s-economy-improves-yen-weakens.html)