Rubber Falls Second Day to Seven-Week Low as Crude Oil Declines

By Aya Takada

July 24 (Bloomberg) -- Natural rubber futures in Tokyo dropped for a second day to the lowest in seven weeks as falling oil cut the appeal of commodities as an inflation hedge.

Futures lost as much as 1 percent to the lowest since June 5. Crude oil traded near a seven-week low after reports showed demand in the U.S. and Japan, two of the three largest oil consuming countries, fell as high prices crimp consumption.

``Investors lost interest in rubber futures because of a slump in oil and other industrial commodities,'' Shuji Sugata, research manager at Mitsubishi Corp. Futures & Securities Ltd. in Tokyo, said today by phone.

Rubber for December delivery fell 0.4 percent to 325.2 yen a kilogram ($3,016 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 June 30 as record oil boosted production costs for rival synthetic rubber.

Futures also declined as supplies increased in Thailand, the world's largest producer and exporter of the commodity used to make tires, Sugata said.

Volumes of the raw material traded on three major markets in Thailand -- Hatyai, Surat Thani and Nikon S Thammarat -- rose to 207 tons July 23 from 193 tons the previous day, according to the Web site of Southland Rubber Co., a Thai rubber shipper.

November-delivery rubber on the Shanghai Futures Exchange, the most-active contract by volume, added 0.9 percent to 25,005 yuan ($3,662) a ton at 10:57 a.m. local time.

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