Rubber Advances to Almost 15-Month High as Revival Lifts Demand

By Aya Takada

Dec. 17 (Bloomberg) -- Rubber climbed to the highest level in almost 15 months after the Federal Reserve said the economy is strengthening, increasing speculation demand for the commodity used in tires will increase.

Futures in Tokyo rose as much as 3.8 percent, extending yesterday’s 4.2 percent rally, the best performance in four months. Prices gained as Japan’s currency fell to the lowest level in more than a week against the dollar, making yen- denominated contracts more attractive to investors.

“Investors are seeking to buy commodities, especially those backed by tight fundamentals,” Shuji Sugata, research manager at Mitsubishi Corp. Futures Ltd. in Tokyo, said today by phone. “Rubber may be their choice as its demand is boosted by rising car sales in China.”

Rubber for May delivery climbed as high as 273.8 yen per kilogram ($3,039 a metric ton), the highest level since Sept. 29, 2008, before settling at 272.1 yen on the Tokyo Commodity Exchange. Prices rose as much as 10 yen, triggering an exchange trading circuit breaker for a second day.

The yen lost as much as 0.5 percent to 90.26 per dollar, the lowest level since Dec. 7, before trading at 90.09 at 3:34 p.m. Tokyo time. The dollar advanced after the Federal Open Market Committee said yesterday that “deterioration in the labor market is abating” and that “household spending appears to be expanding at a moderate rate.”

China Tariffs

Rubber also rallied after China’s Ministry of Finance said it will cut tariffs on natural rubber imports, stoking speculation Chinese purchase of the commodity will increase.

Rubber for March delivery on the Shanghai Futures Exchange climbed by as much as 4.1 percent to 23,280 yuan ($3,409) a ton, the highest level since August last year. The contract ended at 22,960 yuan at 3 p.m. local time.

The so-called temporary tariff rate for ribbed smoked sheet rubber will be set at 20 percent of the import price or 1,600 yuan ($234) a metric ton, whichever is lower, the ministry said yesterday. The tariff for technically specified rubber is set at 20 percent of the imported price or 2,000 yuan per ton, it said.

Rubber futures in Tokyo have almost doubled this year as China, the world’s largest consumer, led a recovery in demand as the government’s stimulus measures boosted the nation’s car sales to a record.

China’s full-year auto sales may be about 13 million, according to Booz & Co., which advises carmakers and investors in China. By 2015 output in the country may reach 15 million, according to Koji Endo, managing director of Advanced Research Japan in Tokyo.

In the cash market, shippers in Thailand, the largest producer and exporter, raised the price of so-called RSS-3 grade rubber for January shipment to $2.90 a kilogram today from $2.75 yesterday, according to Takaki Shigemoto, an analyst at research and investment company JSC Corp. in Tokyo.

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