Rubber Falls to Four-Month Low as Japan Quake May Derail Demand

Rubber futures declined for a third day, tumbling to the lowest level in more than four months, after Japan’s strongest earthquake damaged car plants and caused electricity shortages, threatening the economic recovery.

August-delivery futures plunged as much as 13 percent to 335 yen a kilogram ($4,097 a metric ton), the lowest intraday price on the Tokyo Commodity Exchange since Nov. 4, before settling at 353 yen.

“Selling continues as investors want to reduce risk amid concern that demand may slow after the earthquake,” Gu Jiong, an analyst at commodity broker Yutaka Shoji Co., said from Tokyo. “Demand from China and the U.S. is still not clear and investors are wary of taking long positions,” he said.

Rubber has plunged 33 percent from a record 528.4 yen reached Feb. 17 as worsening Middle East tensions and slowing car sales in China, the largest buyer, raised concerns demand may decline. Losses intensified after the earthquake in Japan caused power disruptions, forcing carmakers to halt production.

Tocom expanded the trading limit for rubber contracts for a second time yesterday to 50 yen from the previous settlement price, the exchange said yesterday on its website.

Asian stocks slumped, dragging the benchmark index down by more than 10 percent from its January peak, on concern a nuclear accident and power shortage caused by the earthquake will cripple the Japanese economy.

Japan’s Prime Minister said the danger of further radiation leaks from a crippled nuclear power station is rising after three explosions and a fire at the site 135 miles north of Tokyo.

Output Loss

“Demand for rubber could be hit in the near term due to the physical lack of access and potential disruption to tire and car-manufacturing plants in Japan, especially near the earthquake,” Ivy Ng, an analyst at CIMB Investment Bank, said in a report today. “Also, potential buyers could stay on the sidelines, hoping to snap up these commodities at lower prices due to short-term uncertainty in the market.”

Toyota Motor Corp., the world’s largest carmaker, may lose output of at least 40,000 vehicles, Shiori Hashimoto, a spokeswoman for the company, said by phone yesterday. The manufacturer’s profit will be cut by 6 billion yen ($72 million) for each day of lost operations in Japan, while Nissan Motor Co. and Honda Motor Co. may each lose 2 billion yen a day, Goldman Sachs Group Inc. estimated.

Thai Shipments

Some investors are concerned Thailand, the top rubber supplier, may halt exports, said Navarat Kaewpratarn, a senior marketing official at Future Agri Trade Co.

Thailand’s Deputy Prime Minister Suthep Thaugsuban asked exporters to suspend shipments to stem a plunge in prices and will ask banks to offer low-interest loans to help shippers stockpile the commodity.

The Thai government will negotiate with commercial banks to extend low-interest loans to exporters for them to buy unsmoked sheets from farmers at a minimum price of 120 baht a kilogram, said Suthep, who chairs the rubber policy committee. The government will also encourage farmers not to sell sheet below the minimum level, he said.

The auctioned price of ribbed smoked sheet at a rubber trading center in the southern province in Songkhla gained 1 percent to 106 baht a kilogram, boosted by the government’s attempt to tackle price declines, the Rubber Research Institute of Thailand said on its website. The price tumbled 19 percent yesterday.

The free-on-board price, or cost without freight and insurance, for Thailand’s benchmark ribbed smoked sheet plunged today for a ninth day, tumbling 10 percent to 135.25 baht ($4.94) a kilogram on demand concerns, the institute said. The price reached a record 198.30 baht on Feb. 21.

May-delivery rubber in Shanghai declined as much as 2.2 percent to 32,750 yuan ($4,986) a metric ton, the lowest intraday level since Dec. 10, before closing at 33,155 yuan.

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