Rubber Gains Second Day on Speculation Producers May Cut Output

By Aya Takada and Jae Hur

Oct. 29 (Bloomberg) -- Natural rubber gained for a second day on speculation major producers may cut production to bolster prices that have fallen to three-year lows and as a rally in stock markets eased concern an economic slump would curb demand.

Futures in Tokyo rose as much as 8.2 percent as officials from Thailand, Indonesia and Malaysia, the world's top producers, met in Bangkok to discuss how to boost prices. Rubber has plunged 51 percent from a 28-year high of 356.9 yen on June 30.

``There were two key factors in the market'' and the first was market speculation that the producers will cut output and the second was the rise in stock markets, Jun Nishimuta, an analyst at Kanetsu Asset Management Co. in Tokyo, said today by phone. The yen's weakness also supported prices, he said.

Rubber for April delivery added 5.4 percent to close at 173.9 yen a kilogram ($1,784 a metric ton) on the Tokyo Commodity Exchange after trading as high as 178.5 yen. Prices reached a three-year low of 154.6 yen yesterday.

Rubber, used for car tires, has dropped since June on concern the global lending crunch will push the world into recession, reducing demand for commodities. Thailand and Malaysia have proposed felling trees as a way to curb supply, while Indonesia has called on planters to reduce tapping.

``We are focusing on four measures -- cutting old rubber trees, stop adding new plantation, delaying tapping and asking exporters to stop quoting prices,'' Somchai Charnnarongkul, director-general of Thailand's farm ministry's Department of Agriculture, told reporters during a break at the meeting. ``There may be other short-term measures as well.''

Reduced Supplies

Malaysia, the world's third-biggest rubber producer, plans to reduce supplies by chopping down old trees, the government said yesterday.

Malaysia expects to remove as much as 38,000 tons a year from the market by accelerating its replanting program involving 32,000 hectares of existing rubber land, Minister of Plantation Industries and Commodities Peter Chin said in a statement.

Indonesia, the world's second-largest rubber exporter, will urge growers to reduce the frequency of tree tapping to curb production by as much as 30 percent, Agriculture Minister Anton Apriyantono said Oct. 16.

Asian stocks joined a global rally today and the yen booked its biggest decline since 1974 yesterday on speculation Japan will cut interest rates. A weaker yen supports futures as rubber trades globally in dollars.

January-delivery rubber on the Shanghai Futures Exchange, the most-active contract, closed down 20 yuan at 13,245 yuan ($1,936) a ton.

To contact the reporters on this story: Aya Takada in Tokyo atakada2@bloomberg.net; Jae Hur in Singapore at jhur1@bloomberg.net