Rubber Drops as Equities Decline, Car Output Cut Raise Concern

By Aya Takada

Oct. 31 (Bloomberg) -- Natural rubber declined for the first day in four as falling Asian stocks and a production cut by a Japanese carmaker raised concern that demand will decline for the raw material used to make tires.

Futures in Tokyo fell as much as 7.3 percent from a one-week high reached yesterday after rubber producers agreed to cut output. Asian stocks slumped on weaker profit forecasts. Mazda Motor Corp., a third owned by Ford Motor Co., plans to reduce its production in Japan by 73,000 units in the second half of this fiscal year, the company's chief executive said yesterday.

``The market is overshadowed by demand concerns,'' Takaki Shigemoto, an analyst at Tokyo-based commodity broker Okachi & Co., said today by phone. ``Investor sentiment is vulnerable to negative news from the auto sector.''

Rubber for April delivery lost 4.6 percent to 181.2 yen a kilogram ($1,839 a metric ton) on the Tokyo Commodity Exchange at 12:44 p.m. local time.

Mazda cut its full-year sales forecast by 5.1 percent to 1.405 million vehicles for the year ending March 31 as the global credit crunch and economic slowdown prompt consumers to spend less. The company reduced its North American sales estimate by 1 percent to 396,000 units, and trimmed its China sales goal by 28 percent to 130,000.

Rubber futures reached a three-year low of 154.6 yen Oct. 28, plunging 57 percent from a 28-year high of 356.9 yen June 30, when record-high oil boosted investor demand for commodities as an inflation hedge.

Production Cut

Thailand, Indonesia and Malaysia, the world's three largest producers, agreed this week to cut production by 210,000 tons next year by felling trees.

Thailand, the world's biggest rubber shipper, plans to cut exports by 5.5 percent in 2009 as growers trim output on concern a recession will curb demand for tires, Luckchai Kittipol, president of the Thai Rubber Association, said yesterday.

Thailand may ship 2.6 million tons next year, 150,000 tons less than this year, Luckchai said. He estimated the nation's output at about 3 million tons in 2008. The three countries may produce about 7 million tons of rubber this year, according to industry estimates.

January-delivery rubber on the Shanghai Futures Exchange, the most-active contract, lost 1.5 percent to 13,500 yuan ($1,974) a ton at the 11:30 a.m. local time break.

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