Rubber dropped for the third time in four days as the price of crude oil declined and optimism faded that China’s would increase purchases after dropping its currency’s peg to the dollar.

Futures in Tokyo declined as much as 2.1 percent after climbing 3 percent yesterday after China signaled it will unshackle the yuan’s fixed rate to the dollar, stoking speculation that the world’s largest consumer may boost imports.

“The good news from the yuan flexibility has faded as it lacked support from Wall Street,” said Chaiwat Muenmee, an analyst at Bangkok-based commodity broker DS Futures Co.

Rubber for November-delivery dropped as much as 5.8 yen to 276.8 yen per kilogram ($3,048 a metric ton) before settling at 277.6 yen on the Tokyo Commodity Exchange.

The November-delivery contract on the Shanghai Futures Exchange declined 1.9 percent to settle at 21,475 yuan ($3,151) a ton. Yesterday, the price climbed as high as 22,200 yuan, the highest level since June 3.

The People’s Bank of China pledged on June 19 to make the yuan more flexible, making imports more affordable to buyers in the world’s third-largest economy.

China, the world’s largest auto market, is the biggest user of natural rubber. The nation may increase gross imports of the raw material to 1.68 million tons this year, from 1.59 million in 2009, according to a May report from the Association of Natural Rubber Producing Countries.

Debt Crisis

“Investors are still worried that the European debt crisis may weaken rubber demand,” said Navarat Kaewpratarn, marketing official at Future Agri Trade Co., said by phone from Bangkok.

Investor sentiment worsened after the European Central Bank governing council member Christian Noyer said some banks are facing funding problems. Standard & Poor’s Ratings Services lowered its economic growth forecast for Spain and said Spanish lenders face difficult years as credit losses mount.

“The market is in correction mode after sharp gains yesterday,” said Kazunori Kokubo, general manager for International Business Department at Yutaka Shoji Ltd. “Oil is also down, driving the rubber market lower.”

Crude oil declined for the first time in three days as optimism faded that China’s plan to add more flexibility in the yuan’s fixed exchange rate would strengthen the global economic recovery. A drop in crude oil cuts appetite for rubber.

Increasing supply from Thailand added pressure to the rubber market, Chaiwat said from Bangkok. An average of 200 tons of ribbed smoked sheet RSS-3 rubber a day is available in the market this month, compared with slightly more than 100 tons a day in May, he said.

Global rubber output may total 9.7 million to 10.2 million tons this year as drought and heavy rainfall in key producing countries including Thailand and Indonesia damage supply, Stephen Evans, the secretary-general of the International Rubber Study Group, said in an interview last week. That compares with the group’s forecast range of 10.1 million to 10.6 million tons on March 17.

Demand will probably increase by 4.4 percent this year to 9.8 million tons, based on the assumption that the economic recovery will slow, Evans said. The group forecast 10.2 million tons in March.

Source: Bloomberg

Rubber climbed by the most in a week after China signaled it will unshackle the yuan’s fixed rate to the dollar, stoking speculation the world’s largest consumer may boost imports of the commodity used in tires.

Futures in Tokyo climbed as much as 3.6 percent, extending last week’s rally. The price neared a two-week high of 286.7 yen reached on June 16 amid optimism that Europe’s sovereign-debt crisis may not stall global recovery.

The People’s Bank of China said on June 19 it may allow the yuan to move higher, making imports more affordable to buyers in the world’s third-largest economy. Asian shares and commodities surged while the dollar weakened against major counterparts as China’s move boosted investor confidence.

“A stronger yuan would encourage Chinese tire makers to increase rubber purchases from overseas to cut costs,” Takaki Shigemoto, an analyst at research and investment company JSC Corp. in Tokyo, said today by phone.

November-delivery rubber gained as much as 10 yen to 284.4 yen per kilogram ($3,134 a metric ton) before settling at 282.6 yen on the Tokyo Commodity Exchange.

November-delivery rubber on the Shanghai Futures Exchange added 2.2 percent to 21,675 yuan ($3,183) a ton. Earlier, the price increased to 22,200 yuan, the highest level since June 3.

China, the world’s largest auto market, is also the biggest user of natural rubber. The nation may boost gross imports of the raw material to 1.68 million tons this year from 1.59 million in 2009, according to the May report from the Association of Natural Rubber Producing Countries.

Natural Rubber

China’s production of natural rubber may grow to 680,000 tons this year from 645,800 tons in 2009, the report said.

“Domestic rubber will become more expensive than imported product if the yuan strengthens against the dollar,” Shigemoto said. Raw material imports will climb unless a higher Chinese currency hurts tire exports, he said.

China’s central bank indicated it’s abandoning the 6.83 yuan peg to the dollar adopted during the global financial crisis to shield exporters. American lawmakers had argued that the yuan peg was an unfair subsidy for China’s exporters. A stronger yuan may allow policy makers the ability to stanch inflation without curbing economic growth.

“It’s a vote of confidence in Asia and in risk appetite and a reduction in the dangers of a trade war,” said Sean Callow, a currency strategist at Westpac Banking Corp. in Sydney.

Global rubber output may total 9.7 million to 10.2 million tons this year as drought and heavy rainfall in key producing countries including Thailand and Indonesia damage supply, Stephen Evans, the secretary-general of the International Rubber Study Group, said in an interview last week. That compares with the group’s forecast range of 10.1 million to 10.6 million tons on March 17.

Demand will probably increase by 4.4 percent this year to 9.8 million tons, based on the assumption that the economic recovery will slow, Evans said. The group forecast 10.2 million tons in March.

Source: Bloomberg

June 18 (Bloomberg) — Rubber prices in the top three producing countries will probably “steady” for the next two months, supported by strong demand and supply “tightness,” according to the International Rubber Consortium Ltd.

“Prices should be steady around $3 a kilogram through the next two months,” Abdul Rasip Latiff, chief executive officer of the consortium, which represents growers and exporters in Thailand, Indonesia and Malaysia, said in an interview today.

“The European crisis may slow the economic recovery, but the demand is still there. Auto sales and tire sales are still up,” he said.

Supply has not improved as much as expected after the annual February-to-April low-production period because dry weather has reduced latex output, he said.

“There is tightness in supply, especially from Thailand and northern Malaysia,” Rasip said.

China’s automobile output this year may grow by as much as 15 percent, expanding from a record to 15 million units, Gu Xianghua, deputy general secretary of the China Association of Automobile Manufacturers said May 29. Vehicle sales surged 46 percent to 13.6 million units last year, overtaking the U.S. as the world’s biggest auto market, fueling demand for the commodity used to make tires.

Key rubber producers in Southeast Asia should establish a regional market to minimize the impacts of “excessive speculation” on prices, Hamzah Zainudin, Malaysia’s deputy minister of Plantation Industries and Commodities, said in a speech in Kuala Lumpur today.

Market ‘Timely’

“With excessive speculation, it’s timely for major producing countries including Thailand, Indonesia and Malaysia to consider setting up an Asean regional rubber market to stabilize rubber prices, guided by supply and demand,” he said.

Rubber futures in Tokyo have slumped about 19 percent since advancing to a 21-month high on April 16 on optimism that economic expansion in Asia and record auto production in China will drive demand.

November-delivery rubber was little changed at 275.2 yen a kilogram ($3,027 a metric ton) at 12:19 p.m. local time on the Tokyo Commodity Exchange today after losing as much as 1.1 percent earlier.

Source: Bloomberg

BANGKOK, June 18 (Reuters) – Tokyo rubber futures ended lower
on Friday, extending previous losses as oil prices continued to
fall, dealers said.
* The benchmark rubber contract on the Tokyo Commodity
Exchange <0#JRU:> fell 0.9 yen to settle at 274.4 yen ($3.02) per
kg.
* The contract dropped more than 3 percent on Thursday,
retreating from a 2-week high the previous day, on falling oil
prices while weaker sentiment sparked stop-loss selling, dealers
said.
* “Technical sentiment is getting worse as prices fall below
275 yen support level. Prices could fall further as players may
sell contracts to stop losses,” one dealer said.
* Oil extended losses on Friday as sluggish economic
indicators raised doubts about the sustainability of a recent
acceleration in demand growth by top oil consumer the United
States. [O/R]
* Falling oil prices make an alternative, petrochemical
synthetic rubber cheaper and usually encourage players to sell
natural rubber contracts to avoid losses.
* TOCOM prices were expected to fall further next week with
270 yen seen as a strong support level, dealers said.
($1=90.92 Yen)

Source: Reuters

June 17 (Bloomberg) — Rubber supplies from key producing countries including Indonesia will probably remain low as “unfavorable” weather disrupts production, supporting prices, the Association of Natural Rubber Producing Countries said.

“Unfavorable weather will have a negative influence on supply” in June and July, Jom Jacob, senior economist at the association, said in an interview in Kuala Lumpur today. “The demand-and-supply situation will be favorable for prices to stay high” this year and next, he said, without giving an estimate.

Rubber futures in Tokyo have rallied about 10 percent from a five-month low on May 17 on optimism that economic expansion in Asia and record auto production in China, the biggest vehicle market, will drive demand for the commodity used in tires.

November-delivery rubber declined 3.6 percent to 275.3 yen a kilogram ($3,018 a metric ton) on the Tokyo Commodity Exchange today, snapping a five-day, 9.8 percent winning streak.

“The rubber price lately went down slightly, but I am confident that it will not go down too much,” Bernard Dompok, Malaysia’s Plantation Industries and Commodities Minister, said today. “If you look at the fundamental factors, there’s no change in supply and demand.”

The producers’ association will later this month revise down the supply forecast for its member countries, which represent 94 percent of global output. It projected in May that production may expand 6.2 percent this year to 9.37 million tons.

“June is supposed to be a dry month for Indonesia and India but the monsoon is going on there, disrupting tapping,” Jacob said.

Strong Demand

Supply next year will not see a significant improvement as some aging trees will be uprooted this year for replanting and new trees planted in 2005 will not be mature enough to generate high yields, said Jacob. Rubber trees take about seven years to mature and yields remain low until the 10th year.

“Demand in China, India and Malaysia remains strong,” Djoko Said Damardjati, the association’s secretary-general, said in the same interview. The three countries account for more than 45 percent of global consumption, according to the association.

Natural-rubber imports by China jumped 17 percent to 602,000 tons in January to April, from the same period last year. Demand for natural and compound rubber rose 26 percent to 1.05 million tons, the association said in its May newsletter. Consumption of natural rubber in India during the first four months rose 12 percent to 316,000 tons, it said.

China’s automobile output this year may grow by as much as 15 percent, expanding from a record to 15 million units, Gu Xianghua, deputy general secretary of the China Association of Automobile Manufacturers, said May 29.

Malaysian Output

The association represents Cambodia, China, India, Malaysia, Indonesia, Papua New Guinea, Philippines, Singapore, Sri Lanka, Thailand and Vietnam.

Natural-rubber output in Malaysia, the third-largest grower, may surge 17 percent this year as rising prices prompt farmers to increase tapping, offsetting crop damage from drought, the Malaysian Rubber Board said.

“Drought has had an impact on production but overall output will increase because of price,” Salmiah Ahmad, director general of the board, said in an interview today.

The nation’s production this year may climb to as much as 1 million tons, said Salmiah. That is more than the 900,000 tons forecast by the Plantation Industries and Commodities Ministry in May. Output last year was 856,189 tons.

Production is targeted to be about 1 million tons next year, rising to 1.8 million tons by 2020, Salmiah said. Exports will be maintained at the current level of about 1 million tons in the long term, she said.

Source: Bloomberg