Rubber Declines From One-Year High as Oil’s Retreat Saps Demand

Rubber Declines From One-Year High as Oil’s Retreat Saps Demand

Oct. 21 (Bloomberg) -- Rubber dropped from a one-year high as oil retreated for a second day, reducing the appeal of the commodity as an alternative to synthetic products made from petroleum for use in car tires.
Rubber futures also fell after the dollar increased against the euro, boosting speculation demand for commodities as an alternative investment may weaken. The most-active contract in Tokyo dropped as much as 1.2 percent after reaching 226.5 yen a kilogram ($2,494 a metric ton) yesterday, the highest level since Oct. 7, 2008.
“The market retreated as it lost support from oil,” Takaki Shigemoto, a commodity analyst at research and investment company JSC Corp. in Tokyo, said today by phone.
March-delivery rubber lost 0.5 percent to 225.7 yen on the Tokyo Commodity Exchange at 11:45 a.m. local time. January- delivery rubber on the Shanghai Futures Exchange dropped 1.6 percent to 18,890 yuan ($2,767) a ton.
Oil in New York fell below $79 a barrel as the dollar climbed and an industry report showed an increase in crude stockpiles in the U.S., the world’s biggest energy consumer.
Crude declined for the first time in nine days yesterday as U.S. equities lost ground and the dollar rose from a 14-month low against the euro, limiting investors’ need for commodities to hedge against inflation. The American Petroleum Institute reported that crude supplies rose 3.85 million barrels.
Auto Sales
Rubber futures in Tokyo gained 66 percent this year amid speculation that the global economic recovery may boost auto sales and demand for the raw material used in tires.
Dongfeng Motor Group Co. expects vehicle sales in China to reach 13 million this year, Supervisor Yong Ren said at the Tokyo International Automotive Conference yesterday.
China’s sales of cars, sport-utility vehicles and multipurpose vehicles climbed to a record 1.015 million units last month, according to the China Association of Automobile Manufacturers. Overall vehicle sales, including trucks and busses, rose 78 percent to 1.33 million units.
Rubber futures were supported by speculation that the Chinese government may take physical delivery of as much as 50,000 tons at the expiry of the November contract on the Shanghai Futures Exchange, Shigemoto said. The volume is equivalent to half the stockpiles monitored by the bourse.
“The Chinese government is said to take action to support local rubber prices,” Shigemoto said.
Rubber inventories increased 4,404 tons in the week ended Oct. 15 to 105,157 tons, the most since November, 2004, the Shanghai exchange said last week.