Rubber Retreats From 10-Month High Amid European Debt Concerns

Rubber dropped from the highest level in more than 10 months on renewed concern that the European debt crisis will derail the global economic recovery, reducing demand for the commodity used in tires.

The contract for delivery in July closed 0.5 percent lower at 331.5 yen a kilogram ($3,596 a metric ton) on the Tokyo Commodity Exchange after earlier declining by as much as 1.5 percent. Futures ended at 333.3 yen yesterday, the highest settlement price for the most-active contract since March 28.

Spanish 10-year bond yields jumped to a seven-week high yesterday as the country’s Prime Minister Mariano Rajoy faces opposition calls to resign on corruption allegations. Rates on Italian debt rose as polls showed Silvio Berlusconi had closed the gap on his rival before elections this month even as he appeals a four-year prison sentence for tax fraud.

“Political turmoil in Spain and Italy caused risk aversion,” Naohiro Niimura, a partner at research company Market Risk Advisory in Tokyo, said in an e-mail today.

Losses were limited on speculation that China, the world’s largest consumer, may step up purchases before the Lunar New Year holiday next week, Niimura said.

Inventories gained 807 tons to 98,814 tons, based on a survey of nine warehouses in Shanghai, Shandong, Yunnan, Hainan and Tianjin, the Shanghai Futures Exchange said Feb. 1. That’s compared with 101,482 tons in reserves on Jan. 10, the highest level since March 2010. Imports by China may rise 0.9 percent this year to 3.4 million tons, the Association of Natural Rubber Producing Countries said in its monthly bulletin on Feb. 1.

Rubber for May delivery rose 0.1 percent to close at 26,810 yuan ($4,300) a ton on the Shanghai Futures Exchange. Thai rubber free-on-board gained 0.3 percent to 99.15 baht ($3.33) a kilogram, according to the country’s Rubber Research Institute.

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