Rubber Futures Slump Limit on Strengthening Yen, Demand Concern

By Rattaphol Onsanit

Oct. 15 (Bloomberg) -- Natural rubber plunged by the daily price limit for the sixth time this month, as a strengthening yen reduced the appeal of futures and on concern that slowing global growth may cut demand for car tires.

The commodity dropped to the lowest level since September 2005, as the Japanese currency gained for the first day in five against the U.S. dollar, making the yen-denominated contract less attractive. Rubber is globally traded in dollars.

``This is not a good situation for rubber,'' Yasuhisa Sugimoto, a trader at Okato Shoji Ltd., said by phone from Tokyo. `` Investors are watching the currency. The price is also taking its cue from the bearish mood in Shanghai.''

In China, the world's largest rubber user, sales of passenger cars, sport-utility vehicles and multipurpose vehicles fell 1.4 percent to 552,800 in September, the China Association of Automobile Manufacturers said Oct. 10. It was the second straight decline as drivers deferred purchases because of a slumping stock market.

Rubber for March delivery lost as much as 16 yen, the daily limit, before trading at 177.5 yen a kilogram ($1,754 a metric ton) on the Tokyo Commodity Exchange at the midday break. That marks a 50 percent slump in the most-active contract from a 28- year high of 356.9 yen on June 30.

January-delivery rubber on the Shanghai Futures Exchange, the most-active contract, fell 4 percent to 14,025 yuan ($2,052) a ton at 10:30 a.m. local time.

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