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Rubber Plunges to One-week Low on Concerns Over Debt Crisis

Nov. 21 (Bloomberg) -- Rubber plunged to one-week low as measures by top three producers were viewed as inadequate to limit a price slump and a deepening European crisis may slow economic growth, cutting demand for the commodity used for tires.

April-delivery rubber fell as much as 3.7 percent to 263.5 yen a kilogram ($3,431 a metric ton), the lowest level since Nov. 14, and settled at 264.1 yen on the Tokyo Commodity Exchange. Futures gained 5.6 percent last week, the best performance since the five days ended Oct. 28.

Thailand, Indonesia and Malaysia, the top rubber growers, “encourage respective rubber trade associations to jointly blacklist all contract defaulters” and “urged its rubber trade association members to refrain from panic selling,” the International Tripartite Rubber Council said in a statement following a two-day meeting that ended on Nov. 19 in Bangkok.

The nations, which account for 70 percent of global supply, estimate that stockpiles of their members are at “low” levels and said production may be affected by heavy monsoon rains in coming months. The ITRC will continue monitoring prices and will curb exports and cut down trees when necessary to limit supply and boost prices, the statement said.

“They don’t have tangible measures nor a conclusion on a minimum price, which dampened market sentiment,” said Chaiwat Muenmee, analyst at Bangkok-based commodity broker DS Futures Co.

Prices Plunge

Rubber futures plunged 36 percent this year as Europe’s deepening sovereign-debt crisis and the worst floods in almost 70 years in Thailand, which disrupted car production in Asia and North America, raised demand concerns.

The group described recent price falls as “abnormal and unreasonable.” The nations harvest about 7 million tons of rubber a year.

The benchmark Thai rubber price slumped 13 percent this month to 106.05 baht ($3.42) a kilogram today, according to the Rubber Research Institute of Thailand.

Rubber futures also declined on concerns that “the European crisis may derail recovery in global economy, weakening demand for cars and tires,” said Masayo Kondo, the president of research company Commodity Intelligence Ltd. in Tokyo. “The price may decline towards 260 yen.”

Crude rubber stockpiles held at Japanese warehouses fell 3.6 percent to 12,536 tons on Nov. 10, according to data from the Rubber Trade Association of Japan.

Natural-rubber inventories gained 1,425 tons to 29,194 tons, based on a survey of 10 warehouses in Shanghai, Shandong, Yunnan, Hainan and Tianjin, the Shanghai Futures Exchange said on Nov. 18 in its weekly report. Rubber for May-delivery on the bourse fell as much as 3.6 percent to 24,405 yuan ($3,840) a ton, before closing at 24,600 yuan.

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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