Rubber Drops as Thai Floods Disrupt Car Output, Curbing Demand

Rubber declined on speculation the halt of vehicle production in Thailand because of floods will reduce demand for the material used for tires.

April-delivery rubber lost as much as 2.5 percent to 288.5 yen a kilogram ($3,685 a metric ton) before trading at 291.8 yen on the Tokyo Commodity Exchange at 12:45 p.m. local time. The market was closed yesterday.

The Thai floods are resulting in the biggest supply disruptions in the automobile industry since the March 11 earthquake and tsunami in Japan. Floods spread across 64 of Thailand’s 77 provinces and swamped seven industrial estates where Honda Motor Co. and auto-parts makers have factories. Twenty five provinces remain inundated, the government said.

“Demand in the country and overseas has slowed after Japanese carmakers cut production,” said Chaiwat Muenmee, analyst at Bangkok-based commodity broker DS Futures Co. “We don’t know how long the floods will last. This is negative factor to the rubber markets.”

Toyota Motor Corp., Asia’s biggest carmaker, will scale back production in Japan for a third week and suspend overtime in North America for a second week as disruptions from the flooding spread worldwide. Japanese factories’ reduced hours, which began Oct. 24, will be extended until at least Nov. 12, the Toyota City, Japan-based carmaker said on its website.

Worldwide Disruption

Plants in the U.S. and Canada will continue to suspend overtime and Saturday output while facilities in South Africa, Indonesia, the Philippines, Vietnam, Pakistan and Malaysia will also reduce production next week, it said.

Honda Motor plans to reduce production in Brazil, England and the Philippines because of parts shortages, said Keitaro Yamamoto, a spokesman for the company.

In Shanghai, January-delivery rubber jumped 4.9 percent to 27,075 yuan ($4,243) a ton after falling 4.3 percent yesterday. In a cash market, the benchmark Thai price dropped 0.4 percent to 116.65 baht ($3.80) a kilogram yesterday, according to the Rubber Research Institute of Thailand.

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

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

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