Rubber Drops as Slumping Global Economy Deepens Demand Concern

By Jae Hur

Feb. 23 (Bloomberg) -- Natural rubber futures declined on speculation that the deepening global recession may reduce demand for the commodity used for tires and tubes.

Rubber prices lost 6.6 percent last week, the most since Dec. 5, as carmakers in Japan and other countries slashed output. Asia stocks rallied after falling 7 percent last week, the most since Oct. 24 as the economic slowdown hurts corporate profits. Crude oil dropped for a second day.

“Declining stocks and crude oil sent rubber futures lower,” Jun Nishimuta, an analyst at Kanetsu Asset Management Co. in Tokyo, said today by phone. Prices were also under pressure as the contract for February delivery expired at a lower price today than it did in January, he said.

Rubber for July delivery, the most-active contract, fell as much as 2.3 percent to 131.1 yen a kilogram ($1,409 a metric ton) and was at 132.3 yen by the 11 a.m. midday break on the Tokyo Commodity Exchange. The spot February contract expired at 123.6 yen today, compared with 125 yen in the previous month.

Crude oil for April delivery declined as much as 1.3 percent to $39.53 a barrel in after-hours electronic trading on the New York Mercantile Exchange. A drop in crude oil prices often makes natural rubber less competitive than synthetic rubber.

The MSCI Asia Pacific Index gained 1.1 percent to 76.88 after trading between 75.16 and 76.90. The yen rose for a second day against the dollar, rising as much as 0.6 percent to 92.84 yen. The yen’s advance against the dollar also reduced the value of Japanese currency-based rubber futures, Nishimuta said.

Toyota Motor Corp., the world’s biggest carmaker, will slash domestic output 54 percent in the current quarter as demand falls in the U.S. and Japan. Production, excluding its Daihatsu Motor Co. and Hino Motors Ltd. units, will drop to about 519,000 in the March quarter from 1.13 million units a year earlier, according to figures derived from Toyota’s latest full-year forecast.

May-delivery rubber on the Shanghai Futures Exchange, the most-active contract, rose 1.2 percent to 12,970 yuan ($1,898) a ton by 10:43 a.m. local time.

To contact the reporter on this story: Jae Hur in Singapore at jhur1@bloomberg.net