Rubber Soars to 10-Month High as Oil Rally May Increase Demand

By Jae Hur

Aug. 13 (Bloomberg) -- Rubber jumped to a 10-month high as crude oil’s gains for a second day amid growing optimism of a global economic recovery may boost demand for the commodity used to make tires.

Futures in Tokyo added as much as 4.4 percent to the highest since Oct. 9 as oil extended gains after U.S. equities increased and the Federal Reserve said the recession is easing and pledged to keep interest rates low. A rise in oil prices boosts the appeal of natural rubber against synthetic product.

“Rubber got a boost from higher crude oil prices and relatively higher Shanghai futures,” said Takaki Shigemoto, an analyst at Tokyo-based commodity broker Okachi & Co.

January-delivery rubber rose as much as 8.9 yen to 209.9 yen a kilogram ($2,183 a metric ton) on the Tokyo Commodity Exchange. The price, which fell 1.7 percent yesterday, ended up 4 percent at 209 yen.

Rubber in Tokyo has risen 54 percent this year as crude oil has gained 59 percent and car sales in China have jumped. Crude oil for September delivery added 1.1 percent to $70.90 a barrel on the New York Mercantile Exchange after gaining 1 percent yesterday.

The MSCI Asia Pacific Index gained 1.6 percent to 112.92 as of 3:32 p.m. in Tokyo after the Standard & Poor’s 500 Index advanced 1.2 percent as the Fed said the economy is “leveling out” and that the benchmark interest rate will stay “exceptionally low” for an “extended period.”

Shanghai Prices

Rubber for January delivery on the Shanghai Futures Exchange, the most-active contract, rose for a fourth day, gaining 1.5 percent to 19,665 yuan ($2,878) a ton by 2:35 p.m. local time. The most-active contract has jumped 82 percent this year.

There’s speculation that some funds have been buying Shanghai rubber futures, prompting traders to purchase physical material from producing countries and Japan to take advantage of higher local prices, prompting an increase in stockpiles in Shanghai, said Shigemoto.

Rubber inventories expanded 6,644 tons to 62,778 tons, based on a survey of 10 warehouses in Shanghai, Shandong, Yunnan, Hainan and Tianjin, the exchange said Aug. 7. That was the sixth straight weekly increase and up 52 percent from 41,393 tons on June 25.

“Current inventory levels in Shanghai are believed well above the actual demand in the country,” Shigemoto said. “The market may plunge at some point if current speculative funds start unwinding their bets” on a price rise, he said.

Hyundai Motor Co. boosted sales in China 66 percent in the first seven months of the year to 300,816 vehicles, Xinhua said, citing the automaker.

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