Rubber Rallies From Six-Week Low as Weaker Yen Boosts Appeal

Rubber Rallies From Six-Week Low as Weaker Yen Boosts Appeal

By Aya Takada
Sept. 15 (Bloomberg) -- Rubber increased from a six-week low as the Japanese currency retreated against the dollar, increasing the appeal of yen-denominated contracts.
Futures in Tokyo gained as much as 1.7 percent after touching the lowest level since July 31 amid speculation that demand in China, the world’s largest consumer, may be hurt by a U.S. tariff on Chinese tire imports.
“A weaker yen gave the largest support to the price of rubber futures,” Takaki Shigemoto, an analyst at Tokyo-based commodity broker Okachi & Co., said today by phone.
February-delivery rubber added 0.8 percent to settle at 197 yen a kilogram ($2,163 a metric ton) on the Tokyo Commodity Exchange. Prices slumped 9.2 percent yesterday, the biggest daily loss in nine months.
The yen declined to 91.11 per dollar at 3:40 p.m. in Tokyo from 90.94 yesterday, when it rose to 90.21, the strongest level since Feb. 12. Hirohisa Fujii, a Democratic Party of Japan lawmaker seen as a candidate to be the nation’s next finance minister, may propose selling yen to avoid a so-called double dip in Japan’s economy, according to Nomura Securities Co.
January-delivery rubber on the Shanghai Futures Exchange lost as much as 4.9 percent to 16,850 yuan ($2,467) a ton, the lowest level since July 22, before trading at 17,385 yuan at 2:48 p.m. local time. Prices tumbled by the daily limit, or 5 percent, yesterday.
China has filed a complaint to the World Trade Organization on Barack Obama’s decision to impose a duty of 35 percent on $1.8 billion of automobile tires from the country.
‘Highly Concerned’
China “is highly concerned about the negative effect” the U.S. decision may have on its export companies, and will help tiremakers “overcome this difficulty,” Zhong Shan, vice minister at China’s Ministry of Commerce, said yesterday.
The case brought by the U.S. steelworkers’ union was the largest so-called safeguard petition filed to protect U.S. producers from increasing imports from China. Union leaders and Democratic lawmakers said the decision demonstrates Obama’s commitment to protecting U.S. workers and jobs.
President Obama downplayed the possibility that the tire tariff would spark a cycle of retaliation by China. “We’re not going to see a trade war,” Obama said yesterday in an interview with Bloomberg News.
To be sure, the actual impact on demand from the U.S. decision may be “virtually zero,” according to Michael Coleman, managing director of Aisling Analytics, a Singapore- based hedge fund.
Thai Prices Drop
“The tires we’re talking about are not tires that have much, if any, natural rubber in them,” Coleman said yesterday. The tariff had a “negative, psychological impact,” he said.
In the cash market, shippers in Thailand, the world’s largest producer and exporter, offered so-called RSS-3 grade rubber for October shipment at $2.01 a kilogram today, down from $2.10 yesterday, according to Shigemoto.
China is Thailand’s biggest rubber export market and last year accounted for about 820,000 tons out of total exports of 2.6 million tons. “If the tariff leads to the drop in China’s tire production, it will definitely affect the rubber industry,” Piyaporn Saelim, manager of the Thai Rubber Association, said by phone yesterday.
Indonesia, the world’s second-largest producer, may miss this year’s export target because of the U.S. decision, said Asril Sutan Amir, chairman of the Indonesian Rubber Association.
Indonesia may export 700,000 tons to China this year, from an earlier target of 800,000 tons, he said yesterday. That compares with 600,000 tons shipped in 2008.
To contact the reporter on this story: Aya Takada in Tokyo atakada2@bloomberg.net Last Updated: September 15, 2009 03:36 EDT