Rubber Futures Drop to Two-Month Low on Concern Demand May Wane

By Aya Takada

Aug. 7 (Bloomberg) -- Natural rubber futures in Tokyo fell to the lowest in more than two months on concern demand for the commodity used in tires may drop after the Japanese government said the world's second-largest economy was deteriorating.

Prices dropped as much as 1.3 percent to 312.7 yen, matching the low touched on May 20. There's a high possibility the economy has entered a recession, Shigeru Sugihara, head of business statistics at Japan's Cabinet Office, said yesterday.

``Concern about slowing global economies is hurting rubber market sentiment,'' Shuji Sugata, research manager at Mitsubishi Corp. Futures & Securities Ltd. in Tokyo, said today by phone.

Rubber for January delivery lost 0.4 percent to 315.5 yen a kilogram ($2,884 a metric ton) on the Tokyo Commodity Exchange at the 11 a.m. local time break. The most-active contract has fallen 12 percent from a 28-year high of 356.9 yen June 30, when record oil prices raised production costs for the rival synthetic rubber.

Futures also declined as supply in Thailand, the world's largest producer and exporter, increased amid a high-production season, Sugata said.

Losses were limited by a falling yen against the dollar. The Japanese currency declined to the lowest in almost seven months against the dollar yesterday, raising the appeal of yen- denominated contracts.

November-delivery rubber on the Shanghai Futures Exchange, the most-active contract, dropped 3.1 percent to 23,175 yuan ($3,380) a ton at 10:47 a.m. local time.

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