Rubber Declines to Four-Week Low on Chinese Demand Concern Share Business

Rubber Declines to Four-Week Low on Chinese Demand Concern Share Business

Jan. 27 (Bloomberg) -- Rubber declined to the lowest level in four weeks on concern demand for the commodity may weaken as China, the largest user, stepped up measures to slow economic growth. A stronger yen also curbed demand for the material.

Futures in Tokyo fell as much as 3.4 percent to 276.5 yen per kilogram ($3,098 a metric ton), matching the price reached on Dec. 30. Prices lost 6.1 percent in the previous three days, paring this month’s gain to 2.4 percent.

Chinese banks have begun restricting new loans, responding to a push by regulators to contain credit and curb the expansion of the world’s fastest-growing major economy. Concerns over slower growth increased after the International Monetary Fund said yesterday the global financial system remains “fragile,” with sovereign debt posing a risk to markets.

Bank of China Ltd. and China Construction Bank Corp. were told to restrict new loans, according to people familiar with the matter. Gross domestic product in China, the world’s third- biggest economy, expanded at the fastest pace since 2007 last quarter. Slowdown in the nation’s growth may curb vehicle sales, said Kazuhiko Saito, an analyst at Fujitomi Co. in Tokyo.

“The market may retreat further as concern about China’s monetary tightening reduced the risk appetite of investors,” he said by phone today.

July-delivery rubber declined 2.8 percent from its settlement yesterday to end at 278.20 yen per kilogram on the Tokyo Commodity Exchange. Prices more than doubled last year.

May-delivery rubber on the Shanghai Futures Exchange lost as much as 3.3 percent to 23,655 yuan ($3,465) a ton, the lowest level since Dec. 30, before settling at 23,955 yuan.

Stronger Yen

Futures in Tokyo also declined after the Japanese currency touched 89.14, the strongest in five weeks against the dollar. The yen rose 0.3 percent to 89.30 against the dollar at 3:38 p.m. in Singapore.

“The Japanese yen was sharply stronger amid worries over the health of U.S. economy,” Rewat Yenchai, an analyst at AGROW Enterprise Ltd., said by phone from Bangkok today. “That cut appeal for yen-dominated contracts.”

The yen gained on concern the global economic recovery will slow, increasing demand for Japan’s currency as a refuge. The dollar also came under pressure amid speculation the Federal Reserve will keep interest rates near zero before a report forecast to show U.S. business activity slowed this month.

The yen typically strengthens in times of financial turmoil as Japan’s trade surplus makes the currency attractive as it means the nation does not have to rely on overseas lenders.

“Risk aversion is strong globally, making it easy for the yen to be bought,” said Masahide Tanaka, a Tokyo-based senior strategist at Mizuho Trust & Banking Co.

Spot rubber turns weak
Kottayam: Physical rubber prices turned weak on Wednesday. Declines in the domestic and international rubber futures hammered the sentiments, while the market made all-round declines mainly on selling from dealers. Sheet rubber slid to Rs 133.50 from Rs 135 a kg and there were no fresh enquiries from the tyre sector. The global markets are on a technical correction, following profit-booking at higher levels. They are expected to bounce back during the second half of February on fresh buying, an analyst said.



Futures decline



The February futures surrendered gains to close at Rs 133.15 (136.29), March to Rs 135.27 (139.20), April to Rs 139.25 (143.21) and May to Rs 141.80 (146.18) a kg for RSS 4 on National Multi Commodity Exchange (NMCE). RSS 3 weakened to Rs 141.48 (142.62) a kg on Singapore Commodity Exchange (SICOM). The grade moved down to Rs 144.48 (145.77) a kg at Bangkok. The February futures RSS 3 declined to ¥267.8 (¥276) (Rs 138.65), March to ¥269.4 (¥276.4) and April to ¥270.1 (¥279) a kg for during the day session on Tokyo Commodity Exchange. Spot rates were (Rs/kg): RSS-4: 133.50 (135); RSS-5: 130 (130); ungraded: 126.50 (128); ISNR 20: 131 (132) and latex 60 per cent: 91 (91.50). (BL)



Tight supply to push global rubber prices
Global natural rubber supplies are tight and the outlook is bullish on favourable fundamentals, the Association of Natural Rubber Producing Countries said.

“Exporting countries are oriented towards ensuring the best price,” said Djoko Said Damardjati, the association’s secretary general, in a newsletter. "That will improve farm income and export earnings," he said. No producer nation “holds any buffer stock,” he said.



Prices doubled in 2009, the best performance since at least 1976, driven by optimism that demand was increasing as the world recovered from recession and as producers curbed supplies. The association includes Cambodia, China, India, Indonesia, Malaysia, Papua New Guinea, Singapore, Sri Lanka, Thailand and Vietnam. Total output represents about 94 per cent of global supply.(BS) http://www.business-standard.com/india/news/tight-supply-to-push-global-rubber-prices/383751/