Rubber drops to one-week low as Chinese slowdown hits demand
Rubber declined to the lowest level in more than a week as concerns grew that demand from China, the world's largest consumer of the commodity used in tires, may weaken on higher fuel prices and a slowdown in car sales.
The August-delivery contract dropped as much as 1.4 percent to 328.2 yen a kilogram ($3,924 a metric ton), the lowest level since March 9, before trading at 331.3 yen on the Tokyo Commodity Exchange at 11:04 a.m. The most-active contract has gained 26 percent this year.
China, the world's largest oil consumer after the U.S., increased gasoline and diesel prices for the second time in less than six weeks after crude had its biggest monthly gain in a year. China's vehicle sales this year will probably miss their growth forecast because of the slowing economy, an official at the nation's state-backed auto association said.
“Higher fuel costs may add to a slowdown in Chinese car sales, leading to lower demand for rubber from tire makers,” Ken Kajisa, an analyst at broker ACE Koeki Co. in Tokyo, said by phone.
Total vehicle deliveries — forecast by the China Association of Automobile Manufacturers to grow 8 percent this year — may fail to increase by even 5 percent because of the “difficult” economic backdrop, Gu Xianghua, one of two deputies to the secretary-general at CAAM, said at a conference in Qingdao yesterday, citing his opinion. Demand for commercial automobiles would be hit the hardest, Gu said.
Losses in futures were limited as Thailand's Rubber Estate Organization plans to buy rubber sheets from farmers at prices above market rates starting March 22.
The measure aims to boost the price of rubber sheets to 120 baht ($3.90) per kilogram from 110 baht. The state agency may keep stockpiles or sell the supplies to overseas buyers at favorable prices, Managing Director Chanachai Plengsiriwat said.
May-delivery rubber in Shanghai climbed 0.8 percent to 28,290 yuan ($4,472) a ton. The Thai cash price dropped 0.4 percent to 122.55 baht a kilogram yesterday, according to the Rubber Research Institute of Thailand.