Rubber Nears 18-Month High as Economic Recovery Boosts Demand

April 01, 2010, 3:57 AM EDT

By Aya Takada and Supunnabul Suwannakij

April 1 (Bloomberg) -- Rubber advanced for the first time in three days as a weakening Japanese currency raised the appeal of yen-based contracts, and signs of economic recovery in Japan and China enhanced demand for the commodity used in tires.

Futures in Tokyo gained as much as 1.7 percent, nearing an 18-month high of 314 yen per kilogram ($3,363 a metric ton) reached on March 30. The price extended a 12 percent rally in the three months ended yesterday, the fifth quarterly gain.

The Japanese currency declined to 93.64 yen a dollar, an almost three-month low, as signs Asian economies are picking up damped demand for the yen as a refuge. Confidence among Japan’s largest manufacturers rose for a fourth straight quarter as a rebound in the global economy drove demand for exports.

“A weak yen gave the largest support to rubber futures,” Takaki Shigemoto, an analyst at research and investment company JSC Corp. in Tokyo, said today by phone.

September-delivery rubber rose as much as 5.3 yen to 313.6 yen before settling at 313.3 yen on the Tokyo Commodity Exchange.

Investor appetite for risk assets increased as data showed today that confidence improved among Japan’s industrial companies, Shigemoto said.

China Manufacturing

Manufacturing in China, the world’s largest rubber consumer, grew at a faster pace in March, reinforcing an economic rebound in the wake of a record expansion of credit that now risks bubbles in the country’s asset markets.

Futures also gained as supply in Thailand, the world’s largest producer, fell seasonally, Shigemoto said. The nation is in the low-output season, known as wintering, which runs from February through April. During this season, trees shed their leaves and latex output slows.

Thai shippers offered so-called RSS-3 grade rubber for May shipment at $3.49 a kilogram today, compared with $3.50 on March 30, he said.

Shanghai Price

Rubber for September delivery lost 0.3 percent to settle at 24,665 yuan ($3,613) a ton on the Shanghai Futures Exchange. The price retreated after reaching 25,185 yuan, the highest level in almost a month on March 29.

In the cash market, prices extended gains to a record, tracking rally on the Tokyo market and a drop in the Japanese currency, the Rubber Research Institute of Thailand said on its Web site today. Declining inventories in China and Japan as well as lower supply during wintering season also give a boost to the rubber prices, it said.

The auctioned price of unsmoked sheets gained 0.7 percent to 107.68 baht ($3.33) per kilogram. Ribbed smoked sheets rose 0.8 percent to 112.93 baht a kilogram, according to the institute.

(businessweek.com)