Rubber Reaches Two-Week Low on Concern Recession to Cut Demand

By Aya Takada

Feb. 18 (Bloomberg) -- Natural rubber futures tumbled to a two-week low on concern a worsening slump in global economies will slash demand for the commodity used to make vehicle tires.

Prices in Tokyo lost as much as 4.6 percent to the lowest since Feb. 4 after manufacturing in New York declined in February at the fastest pace on record. The Reuters/Jefferies CRB Index of 19 prices dropped yesterday for a sixth day, the longest slump since December and reached the lowest since June 21, 2002.

“Industrial commodities came under pressure as data this week showed a recession worsened in Japan and the U.S.,” Kazuhiko Saito, an analyst at Tokyo-based commodity broker Fujitomi Co., said today by phone.

Rubber for July delivery, the most-active contract, lost 3.4 percent to 138.3 yen a kilogram ($1,501 a metric ton) on the Tokyo Commodity Exchange at the 11 a.m. local time break.

Former Federal Reserve Chairman Alan Greenspan said the U.S. may be doing too little to repair its financial system and promote an economic recovery.

The comments highlight the difficulties President Barack Obama faces in fighting the steepest recession in a generation. The economy contracted at an annual pace of 3.8 percent in the fourth quarter of last year, the most since 1982. Greenspan spoke in an interview before a speech prepared for yesterday to the Economic Club of New York.

Japan’s economy shrank in the fourth quarter at an annualized rate of 12.7 percent, the most severe contraction since 1974, government data showed Feb. 16.

Production Cuts

Rubber futures also declined on concern carmakers may accelerate production cuts as consumption drops, Saito said.

General Motors Corp., the largest U.S. carmaker, said yesterday it needs as much as $16.6 billion in new U.S. loans, more than doubling the aid to date, and must get some of the cash next month to survive. GM plans 47,000 more job cuts worldwide this year and is closing five more U.S. plants by 2012.

Chrysler LLC said it’s seeking $5 billion more from the government and will shed 3,000 more positions. The automakers met a deadline to report progress in revamping operations with $17.4 billion in loans granted so far, and now they must show the U.S. by March 31 that they can become profitable and be allowed to keep the money.

“Uncertainty about whether the U.S. carmakers can survive is another drag on prices of rubber,” Saito said.

May-delivery rubber on the Shanghai Futures Exchange, the most-active contract, lost 3.8 percent to 13,360 yuan ($1,954) a ton at 11:16 a.m. local time.

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