Rubber Reaches 8-Month High on Supply Reduction, Demand Outlook

By Aya Takada

July 24 (Bloomberg) -- Rubber climbed to an eight-month high as producers reduce supply and positive economic data fueled speculation demand for raw materials will rise.

Futures in Tokyo advanced as much as 2.8 percent and are headed for the third weekly gain. Indonesia, the world’s second- biggest rubber producer, cut its output target for this year to 2.2 million metric tons from 2.5 million. Asian stocks rose for a ninth day as sales of existing U.S. homes climbed and South Korea’s economy grew at the fastest pace in almost six years.

“Futures drew support from supply restrictions by rubber producers and an optimistic mood in the financial markets,” Hisaaki Tasaka, an analyst at Tokyo-based commodity broker ACE Koeki Co., said today in a telephone interview.

Natural rubber for December, the most-active contract, gained as much as 4.9 yen to 180.1 yen a kilogram ($1,901 a ton) on the Tokyo Commodity Exchange at 12:32 p.m. local time, the highest since Nov. 12.

Indonesia reduced its output target as low prices discouraged farmers from tapping, Asril SutanAmir, the newly appointed chairman of the Indonesian Rubber Association, said yesterday in Bali. “Besides that, we also see that demand is still low,” he said.

Indonesia’s rubber production in the first half of this year “was slightly below one million tons,” said Amir, elected chairman for a three-year term at a meeting yesterday.

Price Gains

The most-active rubber contract has gained 32 percent this year, after plunging 56 percent in 2008 as the global recession curbed demand, prompting producers to reduce shipments.

Thailand, Indonesia and Malaysia will cut shipments by as much as 48,000 tons a month in the second half, Abdul Rasip Latiff, chief executive officer of the International Rubber Consortium Ltd., said on July 15. The trio reduced exports by 540,000 tons in the first five months of the year, more than the 414,000 ton reduction planned for the first half, he said.

Rubber for January delivery on the Shanghai Futures Exchange, the most-active contract, added 0.9 percent to 17,660 yuan ($2,585) a ton at 11:30 a.m. local break.

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