Rubber retreated from a three-week high on speculation that China, the world’s largest consumer, may raise interest rates to curb inflation, leading to a slowdown in its economic growth and raw-material demand.

May-delivery rubber on the Tokyo Commodity Exchange lost as much as 1.4 percent to 372.8 yen per kilogram ($4,525 a metric ton) before settling at 376.2 yen. The price retreated after reaching yesterday the highest level since Nov. 11, when the most-active contract jumped to a 30-year high of 383 yen.

This weekend may be a “window” for China to raise rates, the China Securities Journal reported today, citing analysts at domestic banks and brokerages. Higher borrowing costs may slow car sales in China, the world’s biggest auto market, said Takaki Shigemoto, analyst at research company JSC Corp. in Tokyo.

“Concern about China’s rate increase is the biggest drag on the price of rubber futures,” Shigemoto said today by phone. “China may take every possible measure to curb prices.”

May-delivery rubber on the Shanghai Futures Exchange dropped as much as 1.8 percent to 32,255 yuan ($4,849) a ton and closed at 33,225 yuan. The price reached a record 38,920 yuan on Nov. 11.

China’s central bank may raise rates around the release of November’s inflation data, scheduled for Dec. 13, the newspaper reported, citing Shenyin & Wanguo Securities Co. analyst Li Huiyong, who forecast consumer prices may rise 5.1 percent last month. Lu Zhengwei, an economist at Industrial Bank Co., said a rate increase is likely between today and Dec. 18, according to the report.

China’s central bank last month ordered banks to set aside larger reserves for the second time in two weeks after raising interest rates in October for the first time since 2007.

Record Thai Price

Losses in futures were limited as the physical rubber price in Thailand, the biggest producer and exporter, increased to a record after rain and flooding reduced latex output. The cash rubber price climbed to 135.55 baht ($4.52) per kilogram today, according to the Rubber Research Institute of Thailand.

Prices will remain “strong” next year as global rubber consumption increases faster than supply, according to Pongsak Kerdvongbundit, managing director of Von Bundit Co., Thailand’s largest exporter.

Rubber futures have gained 36 percent this year on increased demand from China and India, the two largest consumers, as rising incomes boost demand for autos and consumer goods. Heavy rains and floods in Asian producers including Thailand have also disrupted tapping and curbed supply.

Global consumption of natural rubber will outstrip supply by 313,000 tons this year, the most since 2006, Goldman Sachs Group Inc. predicted in a November report, revising its September outlook for an 82,000-ton deficit.

Goldman Sachs raised its price forecast to $4.40 per kilogram next year from $3.60, and to $4.60 per kilogram in 2012 from $3.80, the report said.

Source: Bloomberg

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