Rubber advanced by the most in more than two weeks as heavy rains and floods in southern Thailand, the largest producer, raised concerns that supply will tighten.

The most-active contract on the Tokyo Commodity Exchange gained 1.4 percent to settle at 331.9 yen per kilogram ($4,120 a metric ton), the biggest daily increase since Oct. 13. The contract earlier fell as much as 0.4 percent.

“The market regained ground after inching lower on profit- taking on reports that heavy rains and floods in Thailand will likely lower production, inspiring investors to snap up the commodity,” Sureerat Kunthongjun, an analyst at AGROW Enterprise Ltd., said by phone from Bangkok today.

Floods spread to seven provinces in Thailand’s south after a tropical depression brought heavy rain to the area, the Department of Disaster Prevention and Mitigation said today. The death toll from floods that took place since Oct. 10 rose to 104, according to the agency.

“Floods in key producing areas in Thailand’s south increase worries that low supply will be squeezed further, boosting prices,” Chaiwat Muenmee, an analyst at commodity broker D.S. Futures Co., said by phone from Bangkok. The company’s branch in Songkhla was forced to close temporarily today due to the floods, he added.

Floods in Songkhla province, where the cash rubber market is located, raised concerns that rubber trading and transportation may be disrupted, Ploenjai Jjirajarus, an analyst at Capital Nomura Securities, said by phone from Bangkok. Officials in Songkhla couldn’t be reached for comment.

Hat Yai Hit

Songkhla’s business district Hat Yai was hit by major flooding after 40-hour downpours that continued yesterday evening, newspaper The Nation reported today. The floods are worse than ones that hit the province 10 years ago, it said.

Natural-rubber output in Thailand, the world’s largest producer and exporter, may decline 4.1 percent in the fourth quarter to 930,000 tons, as heavy rains have disrupted latex tapping, Luckchai Kittipol, President of Thai Rubber Association, said by phone yesterday.

“Supplies are quite low as rainfalls persist since July, lowering production,” Luckchai said from Bangkok. “Low supply will continue to support prices.”

Rising crude oil prices and a weakening yen are also supportive, AGROW’s Sureerat said. Increasing crude oil prices improve the appeal of natural rubber against rival synthetic rubber made from petroleum.

Crude Rises

Crude oil rose for a second day, trading above $83 a barrel after climbing to a two-week high on growth in Chinese manufacturing and expectations the Federal Reserve will take steps to stimulate the U.S. economy.

Fed policy makers meeting today and tomorrow will likely announce a program to buy at least $500 billion of long-term securities in a monetary-stimulus strategy known as quantitative easing, according to economists surveyed by Bloomberg News.

The yen retreated from near a 15-year high against the dollar after a New Zealand report today showed wage growth accelerated for the second quarter and Chinese data yesterday showed manufacturing expanded at the fastest pace in six months.

May-delivery rubber on the Shanghai Futures Exchange climbed 2 percent to 32,055 yuan ($4,794) a ton. The price climbed to a record 33,320 yuan Oct. 26.

Higher rubber prices have forced tire makers to raise prices. Bridgestone, Firestone and associate brand passenger, light truck, medium truck, bus, agricultural and off-road tire prices will increase up to 8 percent, Bridgestone Americas Tire Operations said yesterday on its website.

“We continue to face a number of market pressures including increased costs for energy, transportation and raw materials,” said Eduardo Minardi, BATO chairman, CEO and president. “We have reached a point where we must respond.”

Source: Bloomberg

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