Saturday, July 3, 2010

Rubber Gains, Rebounding From 3-Week Low on China Inventories

By Aya Takada and Supunnabul Suwannakij

July 2 (Bloomberg) -- Rubber rebounded after sliding to the lowest level in three weeks as Chinese buyers began replenishing the lowest inventory level since 2003.

Futures in Tokyo advanced as much as 1.1 percent after earlier falling to the lowest since June 10. The price has slumped 6.4 percent this week, the biggest drop since the week ended May 7, on concerns over the health of the global economy.

“Bargain hunting after recent sharp falls erased losses in the market,” Katsumi Kinoshita, senior manager of the institutional department at Okata Shoji, said from Kobe. “Some investors stepped in on the hope that China would build up its low stockpiles,” he added.

The December-delivery contract rose as much as 2.8 yen to 267.5 yen per kilogram ($2,041 a metric ton) before settling at 266.6 yen on the Tokyo Commodity Exchange.

November-delivery rubber on the Shanghai Futures Exchange gained 0.2 percent to settle at 21,385 yuan ($3,157) a ton.

China’s natural rubber inventories increased 1,211 tons this week to 15,982 tons, based on a survey of 10 warehouses in Shanghai, Shandong, Yunnan, Hainan and Tianjin, the Shanghai Futures Exchange said today.

Tight Supply

Tight global supply amid strong demand, especially from China, will support prices, the Association of Natural Rubber Producing Countries said in its June newsletter.

The possibility of any “marked improvement” in supply in the short term is limited, given aging rubber trees and weather constraints, the association said June 30.

Worries over a slowdown in the U.S. economy raised concern that demand for the commodity may weaken, pressuring rubber prices earlier today.

“U.S. data this week added to speculation that the economic recovery may stall,” Kazuhiko Saito, an analyst at Tokyo-based broker Fujitomi Co., said today by phone.

Reports on U.S. manufacturing, employment and home sales pointed to slower growth in the second half of the year, just as government spending to stimulate the economy begins to wane. Economists said data today will show the jobless rate in the world’s largest economy rose for the first time this year.

Cash prices in Thailand declined as investors were disappointed with U.S. economic data and worried about the global economic recovery, the Rubber Institute of Thailand said on its website today. The Thai benchmark price tumbled 2.6 percent today to 112.60 baht ($3.47) a kilogram, it said.

--Editors: Jarrett Banks, Richard Dobson

source - http://www.businessweek.com

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