Rubber Drops for Third Day to Three-Year Low on Growth Concern

By Aya Takada

Oct. 28 (Bloomberg) -- Natural rubber futures declined for a third day to the lowest in three years on concern financial market turmoil is worsening an economic slump and will slash demand for the commodity used to make car tires.

Futures in Tokyo fell as much as 2.9 percent to the lowest since June, 2005, after plunging by the daily limit of 16 yen a kilogram for a second day yesterday. Asian stocks dropped for a fifth day, sending Japan's Nikkei 225 Stock Average to a 26-year low amid concern the widening financial crisis and slowing economic growth will hurt corporate profits.

``Investor interest in commodities will not return until their confidence in markets is restored, possibly by additional measures by the governments to stabilize the financial system,'' Shuji Sugata, research manager at Mitsubishi Corp. Futures & Securities Ltd. in Tokyo, said today by phone.

Rubber for March delivery lost 0.8 percent to 158 yen a kilogram ($1,693 a metric ton) on the Tokyo Commodity Exchange at the 11 a.m. local time break. April-delivery rubber, listed on the exchange today, fell to 157.2 yen after opening at 162.5 yen.

Losses in futures were limited as the yen declined against the dollar amid speculation that Japan's central bank will sell its own currency for the first time since March 2004.Futures tend to move in the opposite direction to the yen as rubber trades globally in dollars.

`Excessive Volatility'

The Group of Seven industrial nations expressed concern in an unscheduled statement yesterday about the yen's ``excessive volatility'' after a request from Japan, Finance Minister Shoichi Nakagawa said on the same day, adding his government was ready to act if needed. The currency had earlier traded close to a 13-year high against the dollar.

Rubber futures retreated 56 percent from a 28-year high of 356.9 yen June 30. The world's biggest rubber producers including Thailand and Indonesia will meet in Bangkok Oct. 29-30 to discuss steps to counter the slump in prices, Suharto Honggokusumo, executive director of the Indonesian Rubber Association, said Oct. 17. Indonesia already asked producers to cut the frequency of tree tapping to curb rubber output and support prices.

January-delivery rubber on the Shanghai Futures Exchange, the most-active contract, added 3.5 percent to 13,005 yuan ($1,901) a ton at 10:45 a.m. local time.

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