Rubber declined after advancing to a record for a second day as investors sold the commodity to lock in profits amid concern about supply. The cash price in Thailand, the largest supplier, climbed to an all-time high.

June-delivery rubber fell 0.2 percent to settle at 448.4 yen a kilogram ($5,401 a metric ton) on the Tokyo Commodity Exchange. Earlier it surged to a record 454.4 yen amid concern a seasonal drop in shipments from top exporter Thailand may worsen a supply shortage.

Rubber has advanced 8.2 percent this month, extending last year’s 50 percent rally. Demand for the commodity used in tires grew on rising car sales led by China and India, outpacing supply as Thai output, hurt by heavy rain and flooding last year, may drop further as the low-production period starts next month.

“As the market has advanced rapidly since late last year, it is ripe for profit-taking,” Kazunori Kokubo, general manager at Tokyo-based broker Yutaka Shoji Co., said today by phone. “I don’t expect a deep correction as fundamentals remain bullish.”

The Thai cash price extended a rally to 164.80 baht ($5.43) per kilogram, fueled by strong demand from major buyers and rising crude oil prices, the Rubber Research Institute of Thailand said.

Buyers in China, the world’s largest consumer, may step up purchases to replenish stockpiles before the nation celebrates the Lunar New Year holidays next month, Kokubo said.

Tire makers also keep purchasing rubber, regardless of record prices, to sustain production as their inventories are low, he said.

Bridgestone Falls

Bridgestone Corp., the world’s largest tiremaker, fell the most in three months in Tokyo trading after Nomura Securities Co. cut its stock recommendation to “neutral” as its profits may be curbed this year because of higher raw material costs. Shares dropped as much as 3.7 percent to 1,611 yen before settling at 1615 yen on the Tokyo Stock Exchange.

China’s passenger-vehicle sales surged 33 percent in 2010, as government stimulus measures and economic growth helped the nation remain the world’s largest auto market for a second year. Annual vehicle sales surged about 10-fold in the past decade on rising affluence and government stimulus programs.

Passenger-car sales in India may increase 18 percent this year, according to Pawan Goenka, head of the Society of Indian Automobile Manufacturers. Shipments jumped 31 percent to 1.87 million last year, according to the group, which represents all automakers in the country.

Natural-rubber production in Thailand during leaf-shedding season, which runs from the end of February until May, shrinks 45 to 60 percent from peak production, the Association of Natural Rubber Producing Countries said in December. The low- production period also occurs at the same time in northern Indonesia and Malaysia, lowering output, the group said.

May-delivery rubber in Shanghai lost 0.6 percent to close at 38,060 yuan ($5,767) a ton. The price reached a record 38,920 yuan on Nov. 11.

Source: Bloomberg

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