Rubber Advances to Three-Month High as Rains Curb Output in Southeast Asia

Rubber advanced for a third day to the highest level in more than three months on concern that rainfall in key producing countries will reduce supply, boosting the appeal of the commodity used to make tires.

The January-delivery contract advanced as much as 1.7 percent to 294.3 yen a kilogram ($3,430 a metric ton) on the Tokyo Commodity Exchange, the highest level since May 6, before settling at 293.8 yen.

“A lot of rain in Southeast Asia this year has affected supply,” Gu Jiong, an analyst at commodity broker Yutaka Shoji Co., said by phone from Tokyo. The top three producers, Thailand, Indonesia and Malaysia, account for about 70 percent of output.

Heavy rain is expected across Thailand, the largest producer, this week and next, the Thai Meteorological Department said on its website today. In Indonesia, rains are forecast in Sumatra, Kalimantan and parts of Sulawesi and Java this month and next, the Climatology and Geophysics Agency said on Aug. 11.

A La Nina weather event, which can bring above-average rainfall to parts of Asia, may persist until at least the end of this year, Australia’s Bureau of Meteorology said on its website yesterday.

Cash prices in Thailand gained 0.5 percent to 105.5 baht ($3.34) per kilogram as limited supply came onto the market after the rains, the Rubber Research Institute of Thailand said today on its website. January-delivery rubber in Shanghai rose 1.8 percent to close at 25,820 yuan ($3,803) a ton.

New Tax

“Some tiremakers began to buy rubber before a new tax in Thailand takes effect,” said Jiong at Yutaka Shoji. “From now to Sept. 30, we will see more buyers from Asia and the U.S.”

A higher levy on Thai exports ranging from 0.9 baht to 5 baht a kilogram, based on a sliding scale of free-on-board prices, will take effect from Oct. 1, replacing the existing levy that ranges from 0.9 baht a kilo to 1.4 baht.

A weaker yen and gains in Asian equities helped to support rubber today, said Hiroyuki Kikukawa, general manager of research at Tokyo-based IDO Securities Co. The yen fell to 85.92 per dollar from 85.46 yesterday, boosting the appeal of contracts denominated in the Japanese currency.

Buying also gained as some investors are worried supplies can’t be covered during upcoming holidays in producing countries, Yutaka Shoji’s Jiong said.

Markets in Indonesia, the second-largest exporter, will be closed for holidays from Sept. 9 to Sept. 13. Malaysia will have three public holidays next month.

Natural-rubber inventories in China expanded for a third week by 1,667 tons to 21,875 tons, based on a survey of 10 warehouses in Shanghai, Shandong, Yunnan, Hainan and Tianjin, the Shanghai Futures Exchange said Aug. 13. Stockpiles in Japanese warehouses climbed 3.7 percent to 3,396 tons on Aug. 10, according to data from the Rubber Trade Association of Japan.

Top Glove Corp., the biggest rubber-glove maker, expects demand to grow 8 to 10 percent annually, spurred by health-care demand, Executive Director Lim Cheong Guan said on Aug. 18.

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

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