Rubber Drops Fourth Day as Falling Stocks Raise Demand Concern

By Aya Takada

July 10 (Bloomberg) -- Natural rubber futures in Tokyo fell for a fourth day and traded near a four-week low as declines in global stock markets added to concern that slowing economies may curb demand for the commodity used to make car tires.

Futures dropped as much as 0.6 percent, retreating further from a 28-year high reached last month. U.S. stocks tumbled yesterday, sending the Standard & Poor's 500 Index into its first bear market since 2002 on concern continued turmoil in financial markets will erode earnings.

``Futures came under pressure from plunging U.S. stocks,'' Kazuhiko Saito, strategist at Interes Capital Management Co. in Tokyo, said today by phone. ``U.S. car sales are falling amid an economic slowdown, leading to decreased demand for rubber.''

Rubber for December delivery lost 0.5 percent to 335.3 yen a kilogram ($3,140 a metric ton) on the Tokyo Commodity Exchange at the 11 a.m. local time break. The most-active contract reached a 28-year high of 356.9 yen on June 30, as record oil boosted production costs for competing synthetic rubber.

Rubber futures also dropped on expectations supplies will rise in coming months with the approach of the high production season in Thailand, the world's largest producer and exporter, Saito said.

Natural rubber stockpiles in China, the world's biggest consumer, rose by 1,735 tons to 18,960 tons, the Shanghai Futures Exchange said July 4 based on a survey of 10 warehouses in Shanghai, Shandong, Yunnan, Hainan and Tianjin. It was the second weekly gain.

Rubber inventories monitored by the Tokyo Commodity Exchange fell to 6,587 tons on June 30 from 6,862 tons on June 20, the bourse said today in a faxed statement. The volume was the lowest since Nov. 10.

September-delivery rubber on the Shanghai Futures Exchange, the most-active contract, was little changed at 26,800 yuan ($3,914) a ton at 10:59 a.m. local time.

To contact the reporter on this story: Aya Takada in Tokyo atakada2@bloomberg.net