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Latex to Plummet as Weather Improves, Biggest Glove Maker Says

Jan. 12 (Bloomberg) -- Rubber latex may slump in 2011 as flooding and heavy rains abate, allowing production to rebound across Asia, according to Malaysia’s Top Glove Bhd., the world’s biggest rubber-glove maker.

A spike in the price of latex isn’t sustainable, Managing Director Lee Kim Meow said in an interview today. So-called wet latex, a grade used by glove makers that contains 60 percent latex, may fall to 5 ringgit ($1.60) a kilogram within six months from almost 10 ringgit at present, Lee forecast by phone.

Rubber futures in Tokyo surged to a record today, extending last year’s 50 percent rally, as La Nina rains cut output in top producers including Thailand, while demand led by India and China increases. The contract has risen as much as 8.6 percent this year, beating the returns of all the members of the S&P GSCI Commodity Index, including gas oil, cotton and Brent crude.

“In the last few months there were heavy rains, leading to floods in areas where flooding never occurred before,” Lee said from Klang, Selangor. These kind of weather conditions come very rarely and won’t recur year after year, Lee said.

June-delivery rubber climbed as much as 2.3 percent to 450.2 yen a kilogram ($5,409 a metric ton) on the Tokyo Commodity Exchange today. The cash price in Thailand also gained to an all-time high, reaching 163.05 baht ($5.36) per kilogram, according to the Rubber Research Institute of Thailand.

Rubber’s rally has been supported by a supply shortage coupled with strong demand, Sureerat Kunthongjun, an analyst at AGROW Enterprise Ltd., said from Bangkok today. The Tokyo contract may fall to 380 yen per kilo when production rates return to normal, starting from June, Sureerat said.

The latex supply will return to a more regular level once good weather returns, Lee said. Additional supplies of rubber will also become available in 2012 and 2013, when new trees planted a few years ago in Thailand, Cambodia, Vietnam and the eastern Sarawak state in Malaysia, start producing, he said.

To contact the reporters responsible for this story: Chong Pooi Koon in Kuala Lumpur at pchong17@bloomberg.net; Supunnabul Suwannakij in Bangkok at ssuwannakij@bloomberg.net

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