Rubber slumps 4.1% on speculation price rally may weaken demand

Thursday, July 30, 2009
According to an article in bloomberg.com by Jae Hur and Aya Takada, "Rubber slumped by as much as 4.1 percent amid speculation demand for the commodity used to make tires may slow after prices jumped to the highest in more than eight months.
Futures in Tokyo declined after gaining 22 percent in the previous 10 days. The 14-day relative strength index for rubber futures, a gauge of momentum, climbed above 70 this week, a level signaling prices may decline. “Rubber futures went up too much," Shuji Sugata, research manager at Mitsubishi Corp. Futures & Securities Ltd., said today in a phone interview.

"The price appears to have achieved its target level of around 190 yen, where some investors want to cash in.” Rubber for January delivery settled at 181.9 yen a kilogram ($1,932 a metric ton) on the Tokyo Commodity Exchange, down 3.8 percent from its settlement yesterday.

The new benchmark contract touched 190.1 yen on its debut yesterday, the highest intraday price since Nov. 10. A drop in crude oil prices also put pressure on rubber futures, making the synthetic rival more attractive than natural rubber, Sugata said.

Crude oil for September delivery fell 1.7 percent to $66.06 a barrel at 4:31 a.m. in Tokyo. Oil dropped for the second day after U.S. equities fell and a report showed increased crude supplies in the world’s biggest energy consuming nation.
Thailand, Indonesia and Malaysia, the three-largest rubber producers, may deepen a planned supply reduction this year as the recession curbs consumption, Abdul Rasip Latiff, chief executive officer of the International Rubber Consortium Ltd., said July 26. The three producing countries will cut shipments by as much as 48,000 tons a month in the second half, Latiff said July 15. The trio reduced exports by 540,000 tons in the first five months of the year, more than the 414,000 ton reduction planned for the first half, he said.