Natural Rubber Gains as Oil Boosts Cost for Synthetic Product

By Aya Takada

Dec. 10 (Bloomberg) -- Natural rubber futures advanced as rising oil boosted costs of making rival synthetic products, and the weakening Japanese currency raised the appeal of yen-based contracts for the commodity traded globally in dollars.

Prices in Tokyo rose as much as 7.2 percent as crude oil in New York climbed on signs that OPEC will reduce output twice in as many months. The yen declined for the first time in three days against the dollar as a rally in equities spurred investors to buy higher-yielding assets funded with Japan’s currency.

“Investors bought back futures as oil was supported by expectations for a production cut,” Takaki Shigemoto, analyst at Tokyo-based commodity broker Okachi & Co., said today by phone.

Rubber for May delivery, the most-active contract, gained 6.8 percent to 112.1 yen a kilogram ($1,212 a metric ton) on the Tokyo Commodity Exchange at 12:53 p.m. local time.

Futures have plunged 69 percent from the 28-year high of 356.9 yen reached June 30 as the global recession cut auto sales and reduced demand for tires.

The Bush administration has agreed with congressional Democrats on the broad outlines of legislation to give General Motors Corp. and Chrysler LLC federal loans to keep operating, according to an administration official involved in the negotiations.

GM and Chrysler say they need at least $14 billion in combined aid to keep from running out of cash by early next year. Ford Motor Co., which would be eligible to apply for the loans, said it doesn’t expect to.

Auto Sales

U.S. auto sales slumped 37 percent in November to the lowest annual rate in 26 years as the recession and Detroit automakers’ aid pleas kept buyers out of showrooms.

Car sales in China, the world’s largest rubber user, plunged 10 percent in November, the biggest drop in more than three years, the China Association of Automobile Manufacturers said Dec. 5.

Thailand, Indonesia and Malaysia, the world’s three biggest rubber producers and exporters, will discuss price measures at a meeting in Indonesia later this week.

Thailand, the biggest producer, will ask Indonesia and Malaysia to buy the raw material from farmers to stem the slump in prices, Somchai Charnnarongkul, director-general of the Thai farm ministry’s department of agriculture, said Dec. 4.

March-delivery rubber on the Shanghai Futures Exchange, the most-active contract, soared by the daily price limit to 9,380 yuan ($1,366) a ton as of the 11:30 a.m. local time break.

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