Rubber Futures Drop in Tokyo as European Debt Crisis Seen Lowering Demand

By Aya Takada and Supunnabul Suwannakij - Sep 14, 2011 11:49 AM GMT+0700

Rubber dropped amid speculation that slowing growth in Asian economies and Europe’s sovereign- debt crisis may weaken demand for the commodity used in tires.

The February-delivery contract fell as much as 0.7 percent to 362.2 yen a kilogram ($4,707 a metric ton) before trading at 362.5 yen on the Tokyo Commodity Exchange at 1:44 p.m. local time. Futures earlier gained 0.4 percent.

Oil fell from a six-week high in New York and Asian currencies weakened, led by South Korea’s won, after the Asian Development Bank cut its 2011 growth forecast for the region excluding Japan today. It also said inflation will put pressure on regional policy makers to manage price increases even as a faltering global recovery reduces economic growth.

“The downward revision of growth forecast of Asian countries raised concern that slowing economy will hurt demand,” said Chaiwat Muenmee, analyst at Bangkok-based commodity broker DS Futures Co. “Besides, debt issues in Europe remain unresolved.”

The Manila-based lender cut its 2011 growth forecast to 7.5 percent from an April estimate of 7.8 percent, according to the Asian Development Outlook 2011 Update report released today. It raised the region’s inflation estimate to 5.8 percent this year, from a previous forecast of 5.3 percent.

The euro maintained a four-day decline against the yen on concern Greece’s debt woes will raise borrowing costs for other countries in the region. U.S. Treasury Secretary Timothy F. Geithner will urge European governments to step up their crisis- fighting efforts when he meets finance ministers this week, a euro-area official said.

Thailand Floods

Rubber declined 12 percent this year after reaching a record 535.7 yen on Feb. 18 amid worries that the crisis in Europe would hurt the global economic recovery.

“Flooding in Thailand caused some concerns over the supply situation, while the macro economy is still uncertain,” Ker Chung Yang, an analyst at Phillip Futures Pte., said by phone from Singapore. Investors are worried that the debt crisis in Europe may spread and lower demand, he added.

Flash floods and landslides in Thailand have submerged 48 of the country’s 77 provinces in the last two months, according to the Department of Disaster Prevention and Mitigation, with 21 provinces still affected. About 3.68 million rai (588,800 hectares) of farm land may have been damaged, the Ministry of Agriculture and Cooperatives said on its website yesterday.

The cash price of Thai rubber was at 141.4 baht ($4.67) a kilogram today, according to the Rubber Research Institute of Thailand. In Shanghai, rubber for January delivery fell 2 percent to 33,045 yuan ($5,167) a ton at midday break.

Natural-rubber imports by China, the world’s largest consumer, were 200,000 tons in August, according to a statement on the country’s customs agency website on Sept. 10. That compares with 130,000 tons in July and 160,000 tons a year ago, according to Bloomberg data.

To contact the reporter on this story: Supunnabul Suwannakij in Bangkok at ssuwannakij@bloomberg.net; Aya Takada at atakada2@bloomberg.net

To contact the editor responsible for this story: Richard Dobson at rdobson4@bloomberg.net