Rubber Reaches Three-Year Low on Concern Recession May Deepen

By Aya Takada

Nov. 20 (Bloomberg) -- Natural rubber futures slumped to a three-year low as falling Japanese exports and U.S. consumer prices raised concern a global recession may deepen and sap demand for the commodity used to make tires.

Prices fell as much as 6.2 percent to the lowest since June 1, 2005. Japan's exports declined at the fastest pace in almost seven years in October as the financial crisis stifled overseas demand. Exports to Asia fell 4 percent, the first decline in more than six years, while shipments to China dropped for the first time in three years, the Finance Ministry said today.

``Hope that growth in China and other emerging markets will offset slump in advanced economies has almost disappeared,'' said Kazuhiko Saito, a strategist at Interes Capital Management Co. in Tokyo. ``Raw material demand will decline further, and we are not sure when contraction is over.''

Rubber for April delivery lost 6.2 percent to 147.6 yen a kilogram ($1,542 a metric ton) on the Tokyo Commodity Exchange at the 11:00 a.m. local time break. The most-active contract reached a 28-year high of 356.9 yen June 30 as record oil prices boosted investor demand for commodities as an inflation hedge.

U.S. consumer prices plunged 1 percent last month, the most since records began in 1947, while housing starts tumbled to an annual rate of 791,000, a record low. The onset of deflation can be devastating for an economy as consumers and businesses delay spending to benefit from lower prices.

Futures also declined after crude oil fell to a 22-month low, reducing the costs of producing competing synthetic rubber, Saito said. Futures often move in the same direction of oil as synthetic rubber is made from naphtha, distilled from petroleum.

Oil fell for a fifth day on concern demand will weaken. U.S. fuel use during the past four weeks averaged 19.1 million barrels a day, down 7 percent from a year earlier, an Energy Department report said yesterday.

Rubber stockpiles monitored by the Tokyo Commodity Exchange rose to 2,794 tons on Nov. 10 from 2,414 tons on Oct. 31, the exchange said today in a faxed statement.

March-delivery rubber on the Shanghai Futures Exchange, the most-active contract, lost 3.1 percent to 12,660 yuan ($1,853) a ton at 10:43 a.m. local time.

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