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Rubber Declines as Debt Crisis May Hurt Demand

Rubber dropped for a second day as the sovereign debt crisis in Europe raised concern that demand for the commodity used for tires may weaken.

The February-delivery contract fell as much as 1.8 percent to 362.1 yen a kilogram ($4,673 a metric ton) before trading at 363.5 yen on the Tokyo Commodity Exchange at 11:29 a.m. local time. Futures dropped 0.2 percent last week.

Oil slid for a third day in New York and Asian stocks fell, extending the benchmark index’s drop last week, amid signs European policy makers are struggling to contain the region’s debt crisis.

“Concerns on European debt crisis dampened market sentiment,” Naoki Asami, head of international department at Kanetsu Shoji Co., said by phone from Tokyo. Volume is “very light” as most investors are on the sidelines, he added.

Officials in Chancellor Angela Merkel’s government are debating how to shore up German banks in the event that Greece fails to meet the budget-cutting terms of its aid package and is unable to get a bailout-loan payment, three coalition officials said Sept. 9. BNP Paribas SA, Societe Generale SA and Credit Agricole SA, France’s largest banks by market value, may have their credit ratings cut by Moody’s Investors Service as soon as this week because of Greek holdings, two people with knowledge of the matter said on Sept. 10.

“More Downside”

In Europe, “things are probably going to get worse before they get better,” Erwin Sanft, deputy head of Asian equities research at BNP Paribas SA in Hong Kong, said in an interview on Bloomberg Television today. “Here in Asia, we’re looking at much more downside for markets. Much larger economies are being drawn into this crisis.”

Rubber has lost 12 percent this year after climbing to a record 535.7 yen on Feb. 18. The European Union is the second-largest consumer of rubber and the U.S. is the fourth-largest, according to data from the Singapore-based International Rubber Study Group.

The market downside is likely to be limited as increasing imports from China showed the demand remains strong, Asami said.

Natural rubber imports by China in August were 200,000 tons, said a statement on the custom agency’s website on Sept. 10. That compares with 130,000 tons in July and 160,000 tons a year ago, according to Bloomberg data.

Natural-rubber inventories rose 3,558 tons to 33,376 tons, the highest since March, based on a survey of 10 warehouses in Shanghai, Shandong, Yunnan, Hainan and Tianjin, the Shanghai Futures Exchange reported in its weekly report on Sept 9.

China’s passenger-car sales rose 3.3 percent in August from a year earlier to 1.04 million units, data from China’s Passenger Car Association showed last week.

In Shanghai, rubber for January delivery gained 1 percent to close at 34,095 yuan ($5,338) a ton on Sept. 9. The market is closed for a public holiday today.

Rains spread across southern Thailand, disrupting tapping, according to the Rubber Research Institute of Thailand. The cash price of Thai rubber declined 0.4 percent to 141.4 baht ($4.71) a kilogram on Sept. 9, according to the institute.

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