Rubber Plunges Most in Seven Months as Stockpiles Swell in China

Jan 06, 2014 2:14 am ET

Jan. 6 (Bloomberg) -- Rubber in Tokyo slid the most in seven months on the first trading day of the year after data showed stockpiles in China expanded to a nine-year high, raising concern demand from the largest consumer is weakening.

The contract for delivery in June on the Tokyo Commodity Exchange lost 4.3 percent, the largest drop at close for a most- active contract since May 23, to settle at 262.6 yen a kilogram ($2,517 a metric ton). Futures dropped 9.3 percent last year, the first annual decline since 2011.

Stockpiles monitored by the Shanghai Futures Exchange rose 0.9 percent to 176,027 tons, the highest level since November 2004, data from the bourse showed last week. China’s official gauge for factory output released Jan. 1 fell more than economists projected to a four-month low, adding to signs of a slowdown in the world’s second-largest economy.

“Rising stockpiles in China boosted concern that Chinese demand is not strong enough to absorb expanding supply,” said Kazuhiko Saito, an analyst at Fujitomi Co., a broker in Tokyo.

Output from growers representing 93 percent of global production rose 4.7 percent to 11.15 million tons in 2013, led by growth in Thailand, Indonesia and China, the Association of Natural Rubber Producing Countries said in a report last week. Output in Vietnam jumped 21 percent to 1.04 million tons, overtaking Malaysia as the third-largest producer, it said.

The contract for May delivery on the Shanghai exchange slid 2.2 percent to close at 17,245 yuan ($2,849) a ton. Futures tumbled 4.4 percent in the four days through Jan. 3.

Rubber free-on-board in Thailand fell 1.2 percent to 80.65 baht ($2.44) a kilogram today, according to the Rubber Research Institute of Thailand.

--Editors: Jarrett Banks, Sungwoo Park