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Rubber in Tokyo declined, paring a weekly gain, on concern demand from China, the biggest consumer, may stall as the government continues to tighten monetary policy to rein in inflation.
The August-delivery contract on the Tokyo Commodity Exchange fell as much as 3.9 percent to 419.2 yen a kilo ($5,175 a metric ton) and traded at 429 yen by 12:55 p.m. local time. Futures have gained 5 percent this week, rallying to 446.9 yen on March 23, more than 33 percent higher than a four-month low reached this month, after Thailand, Indonesia and Malaysia, the three biggest producers, agreed in principle to delay exports if prices tumbled.
“The rally might fizzle out if the biggest buyer China doesn’t step up to the plate and start buying in big volume,” Forest Hu, manager at the rubber department of PKU Founder Commodities Group Co., said by phone from Shanghai today. “From here we can see that China’s tightening looks set to continue so demand might be crimped.”
The central bank has raised interest rates three times since October to cool inflation that reached 4.9 percent in February, exceeding the government’s 4 percent annual target. It has boosted banks’ reserve requirements nine times since the start of 2010, including an increase of half a percentage point from today.
China’s consumer prices may rise about 5 percent in March from a year earlier, the China Securities Journal reported today, citing a report by the pricing department of the National Development and Reform Commission. Prices in the first quarter may have gained about 4.9 percent, the report said.
China Supply
September-delivery natural rubber in Shanghai dropped 0.9 percent to trade at 35,560 yuan ($5,422) a ton at the 11:30 a.m. local time break, paring declines of as much as 1.7 percent.
China’s Hainan province, the country’s biggest producer, will start tapping rubber trees in late March, Zhang Bei, analyst at Nanhua Futures Co., said yesterday. “So domestic supply will be on the rise as those Hainan produce is coming on stream,” Zhang said.
Rubber in Tokyo on March 15 fell to 335 yen, the lowest level since Nov. 4 as worsening Middle East tensions and slowing car sales in China raised concerns demand may decline. Losses intensified after the massive earthquake in Japan.
Source: Bloomberg