Rubber Slumps to 13-Month Low on Concern Tire Demand to Decline

By Aya Takada

Oct. 3 (Bloomberg) -- Natural rubber futures dropped to their lowest in more than 13 months in Tokyo on concern slumping car sales may weaken demand for the raw material used to make tires.

The March contract fell as much as 5.5 percent to the lowest since Aug. 22, 2007, heading for a fifth weekly loss. Bayerische Motoren Werke AG, Ford Motor Co. and Renault SA said yesterday a sales slump may last longer than manufacturers have anticipated.

``A slump in car sales may accelerate,'' Takaki Shigemoto, an analyst at Tokyo-based commodity broker Okachi & Co., said today by phone. ``Turmoil in financial markets is worsening the economic slowdown.''

The most-active contract fell 3.1 percent to 238.8 yen a kilogram ($2,272 a metric ton) on the Tokyo Commodity Exchange at the 11 a.m. local time break.

Prices have retreated 33 percent since reaching a 28-year high at 356.9 yen on June 30, when record oil prices spurred investors to buy commodities as an inflation hedge.

Auto markets won't recover until at least the middle of next year, BMW Chief Executive Officer Norbert Reithofer said yesterday at the Paris Motor Show. Ford CEO Alan Mulally said a recovery won't begin before 2010 and Renault boss Carlos Ghosn said the slowdown may last two years.

Slumping Sales

U.S. vehicle sales in September decreased for an 11th straight month, the longest slide in 17 years, as the credit crisis hurt consumption. Overall sales of new cars and light trucks dropped 27 percent last month, Autodata said Oct. 1. It was the biggest monthly drop since January 1991, according to Ward's AutoInfoBank in Southfield, Michigan.

Rubber futures also declined as Japan's currency climbed against the dollar, making yen-denominated contracts less attractive to investors, Okachi's Shigemoto said.

The futures contract often moves in the opposite direction to the yen as rubber trades globally in dollars. The U.S. currency fell for the third day against the yen on speculation the U.S. economy will weaken regardless of whether lawmakers pass a bill to buy troubled assets from banks in a vote today.

The U.S. Senate approved the $700 billion bank bailout plan earlier this week, and the package today goes to the House of Representatives, which rejected an earlier version of the measure.

The Shanghai Futures Exchange, which trades rubber futures in yuan, is closed this week for a national holiday in China.

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