Rubber Drops as Slow Economic Recovery May Curb Demand Growth

By Aya Takada

Oct. 5 (Bloomberg) -- Rubber dropped for a second day after U.S. job losses accelerated in September, raising concern a slow economic recovery may curb demand for the commodity used in tires.

Futures in Tokyo lost as much as 0.7 percent. Employers cut 263,000 positions last month and the jobless rate climbed to 9.8 percent, the highest level since 1983, according to the U.S. Labor Department. New York University Professor Nouriel Roubini, who predicted the financial crisis, said stock and commodity markets may drop in coming months as the gradual pace of the economic recovery disappoints investors.

“Investors are becoming concerned whether the recovery will be sustained,” Takaki Shigemoto, a commodity analyst at research and investment company TOS in Tokyo, said today by phone. “Worsening unemployment means consumers may keep cutting spending, leading to a drop in sales of cars.”

March-delivery rubber fell as much as 1.3 yen to 199.5 yen a kilogram ($2,221 a metric ton) on the Tokyo Commodity Exchange before settling at 200.4 yen. The Shanghai Futures Exchange is closed for a holiday.

U.S. auto sales fell after a purchasing incentive program left dealers’ inventory depleted. Sales plunged 23 percent last month, and the seasonally adjusted annual sales rate dropped to 9.22 million units, according to industry researcher Autodata Corp. of Woodcliff Lake, New Jersey.

‘Too Fast’

Equities and commodities markets “have gone up too much, too soon, too fast,” Roubini said in an interview in Istanbul on Oct. 3. There was a risk of a correction as markets now realize that “the recovery is not rapid and V-shaped, but more like U-shaped,” he said.

Stocks have surged around the world in the past six months as evidence mounts that the economy is emerging from its deepest recession since the 1930s. The Standard & Poor’s 500 Index has soared 51 percent from a 12-year low in March.

The Reuters/Jefferies CRB Index of 19 commodities rose 29 percent from March 1 through last month, after plunging 50 percent in last year’s second half, the steepest loss in more than five decades.

Losses in rubber futures were limited amid concern that shipments from Indonesia, the world’s second-largest producer, may drop after an earthquake, Shigemoto said.

Rubber and palm oil shipments from Indonesia’s quake-hit Sumatra island may be delayed by more than a week after access to a West Sumatran port was disrupted and plants, roads and houses were damaged, growers’ groups said last week.

Transport problems may halt 50,000 to 60,000 tons of rubber, according to Asril Sutan Amir, chairman of the Rubber Association of Indonesia. A 7.6-magnitude quake in West Sumatra province on Sept. 30. killed more than 460 people, collapsing dozens of buildings in the local capital of Padang and blocking local access to Teluk Bayur port in the city temporarily.

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