Natural Rubber Drops by Trading Limit on Global Growth Concerns

By Rattaphol Onsanit

Sept. 30 (Bloomberg) -- Natural rubber tumbled by the daily trading limit on concern global economic growth will slow after a U.S. financial rescue plan was rejected by lawmakers and as production in Thailand, the biggest exporter, is forecast to rise.

Rubber, the main raw material for vehicle tires, dropped by 6 percent and headed for its worst quarter in two years in Tokyo amid concerns that slower economic growth will reduce car sales. The U.S. is the world's biggest automobile market.

``Confidence on Main Street is weakening,'' Felix Yeo, a trader at Marubeni International Commodities, said by telephone in Singapore. ``Concerns on demand from major economies are affecting rubber.''

March-delivery rubber fell by 16 yen to 250.9 yen a kilogram ($2,406 a metric ton) on the Tokyo Commodity Exchange, the lowest in a year, at 4:11 p.m. local time. Futures have fallen 27 percent for the quarter and are down 30 percent from a 28-year high reached June 30.

The Reuters/Jefferies CRB Index of 19 raw materials fell the most in at least 50 years yesterday after U.S. congressmen voted 228 to 205 against a measure to authorize the biggest government intervention into markets since the Great Depression.

``Prices of agricultural commodities are likely to keep falling through the rest of the year,'' Phornsin Phacharintanakul, vice president of agricultural conglomerate Charoen Pokphand Group, told reporters today in Bangkok. ``Some new harvests will come as the world's economy is languishing.''

Thailand will probably raise rubber output by around 60,000 tons in 2010, Montri Congtrakultien, head of the crop unit at C.P. Group said.

Rubber inventories monitored by the Tokyo Commodity Exchange fell 14 percent to a record low of 1,700 tons on Sept. 20, the bourse said in a faxed statement today.

Lower prices on the exchange than in Thailand prompted shippers and trading houses to sell fewer contracts as a hedge for physical supplies, said Takaki Shigemoto, analyst at Tokyo- based commodity broker Okachi & Co.

To contact the reporter on this story: Rattaphol Onsanit in Bangkok at ronsanit@bloomberg.net