Rubber Futures Drop on Concern Weak Consumption to Curb Demand

By Aya Takada

June 29 (Bloomberg) -- Rubber declined for the first time in three days on concern a recovery in Japanese industrial production may not be sustained because of weakening consumption, capping demand for the raw material used in car tires.

Futures in Tokyo lost as much as 1.3 percent. Japan’s industrial output climbed last month at a pace that matched the steepest increase in 56 years as companies rebuilt inventories. Japan’s retail sales dropped for a ninth month in May as a worsening job market forced households to cut back.

“It looks uncertain whether Japanese industrial activities will keep growing at such a rapid pace, as personal spending is so weak,” Takaki Shigemoto, an analyst at Tokyo-based commodity broker Okachi & Co., said today in a telephone interview. “Raw material demand may not recover much.”

December-delivery natural rubber, the most-active contract, lost 0.5 percent to 158.8 yen a kilogram ($1,665 a metric ton) on the Tokyo Commodity Exchange at 10:04 a.m. local time.

Japan’s retail sales slid 2.8 percent in May from a year earlier, the Trade Ministry said today in Tokyo. Economists surveyed by Bloomberg News predicted a 2.6 percent drop.

Falling wages and an unemployment rate at a five-year high are forcing households in the world’s second-largest economy to reduce spending. A rebound from the nation’s worst postwar recession won’t be sustainable without consumer outlays, which account for more than half of the economy.

Futures also declined as oil fell for a second day, cutting the cost of making rival synthetic rubber, Shigemoto said.

Crude oil for August declined 0.9 percent to $68.56 a barrel as of 11:04 a.m. Tokyo time in after-hours electronic trading on the New York Mercantile Exchange. The contract fell 1.5 percent to $69.16 on June 26 after a report showed savings in the U.S. jumped to a 15-year high in May, signaling a slow recovery in household spending.

Rubber for November delivery on the Shanghai Futures Exchange, the most-active contract, gained 0.7 percent to 15,545 yuan ($2,274) a ton at 10:07 a.m. local time.

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