Rubber Declines on Crude Oil Drop, Malaysia Production Outlook

March 09, 2010, 3:22 AM EST

By Aya Takada and Supunnabul Suwannakij

March 9 (Bloomberg) -- Rubber retreated from a one-week high as crude oil fell and Malaysia, the world’s third-biggest producer, forecast an increase in production.

Futures for August delivery, the most-active contract, lost as much as 1.4 percent to 293.1 yen before settling at 295.1 yen on the Tokyo Commodity Exchange. The drop ended a two-day, 4.5 percent winning streak. The price earlier climbed to 297.9 yen a kilogram ($3,309 a metric ton), the highest level since March 2.

Oil dropped for the first day in three as analysts forecast an increase in U.S. crude supplies last week, signaling demand from the biggest energy user may be slowing. Output in Malaysia may gain 17 percent this year to 1 million tons, Bernard Dompok, the nation’s minister for plantation industries and commodities, said in an e-mail today. Exports of rubber and rubber compound may climb 6.2 percent to 1.2 million tons, he said.

“Higher supply from Malaysia hurts the market sentiment in the near-term, prompting some investors to unwind positions,” Chaiwat Muenmee, analyst at DS Futures Co., said from Bangkok.

The yen advanced against all of its 16 major counterparts as an advance in Asian equities came to a halt, boosting demand for Japan’s currency as a refuge. The yen rose to 89.94.00 per dollar from 90.31 yesterday in New York.

“Rubber lost support from the energy and currency markets,” said Takaki Shigemoto, an analyst at JSC Corp. in Tokyo. “Losses in equity markets also reduced investors’ risk appetite, leading to sale of commodities.”

Wintering

In the cash market, shippers in Thailand, the top producer and exporter, offered RSS-3 grade rubber for May shipment at $3.26 a kilogram, Shigemoto said. The price gained from $3.24 on March 5 as supply declined amid the wintering season, the low- production period that normally lasts until April, he said.

Thailand’s natural rubber production this year may decline to 3.1 million metric tons, compared with an earlier forecast of 3.33 million tons, because of dry weather caused by El Nino, Apichart Jongskul, secretary general of the Office of Agricultural Economics, said Jan. 13.

Supply in Thailand had “robust” annualized growth of 23.8 percent in January, according to a February report from the Association of Natural Rubber Producing Countries.

September-delivery rubber on the Shanghai Futures Exchange gained 0.5 percent to settle at 24,550 yuan ($3,596) a ton.

(businessweek.com)