Rubber drops as slumping economies, European debt crisis may curb demand

RUBBER declined amid speculation that slowing growth in Asian economies and Europe’s sovereign- debt crisis may weaken demand for the commodity used in tyres.

The February-delivery contract fell as much as 1.6 percent to 359.1 yen a kilogramme ($4,670 a metric tonne), the lowest level since Sept. 6, before settling at 360.5 yen on the Tokyo Commodity Exchange.

Oil retreated from a six-week high in New York after the Asian Development Bank cut its 2011 growth forecast for the region excluding Japan today. Chinese Premier Wen Jiabao, facing calls to widen support for indebted European countries, signaled that developed nations should cut deficits and create jobs rather than rely on China to bail out the world economy.

“The downward revision of growth forecast of Asian countries raised concern that slowing economy will hurt demand,” said Chaiwat Muenmee, analyst at Bangkok-based commodity broker DS Futures Co. “Besides, debt issues in Europe remain unresolved.”

The Manila-based lender cut its 2011 growth forecast to 7.5 percent from an April estimate of 7.8 percent, according to the Asian Development Outlook 2011 Update report released recently.

The euro weakened versus the yen for a fifth day on concern Greece’s debt woes will raise borrowing costs for other countries in the region. U.S. Treasury Secretary Timothy F. Geithner will urge European governments to step up their crisis- fighting efforts when he meets finance ministers this week, a euro-area official said.

Thailand Floods

Rubber declined 13 percent this year after reaching a record 535.7 yen on Feb. 18 amid worries that the crisis in Europe would hurt the global economic recovery.

“Flooding in Thailand caused some concerns over the supply situation, while the macro economy is still uncertain,” Ker Chung Yang, an analyst at Phillip Futures Pte., said by phone from Singapore. Investors are worried that the debt crisis in Europe may spread and lower demand, he added.

Flash floods and landslides in Thailand have submerged 48 of the country’s 77 provinces in the last two months, according to the Department of Disaster Prevention and Mitigation, with 21 provinces still affected. About 3.68 million rai (588,800 hectares) of farm land may have been damaged, the Ministry of Agriculture and Cooperatives said on its website.

The cash price of Thai rubber was at 141.4 baht ($4.67) a kilogramme today, according to the Rubber Research Institute of Thailand. In Shanghai, rubber for January delivery fell 2.2 percent to close at 32,950 yuan ($5,153) a ton.

Source: Bloomberg