Rubber Extends Recovery From Five-Month Low on Growth Outlook

Jan 16, 2014 2:13 am ET

Jan. 16 (Bloomberg) -- Rubber in Tokyo extended a recovery from a five-month low as optimism grew that global economic growth will accelerate this year, supporting demand for the commodity used in tires.

The contract for delivery in June on the Tokyo Commodity Exchange climbed 0.3 percent to end at 256.4 yen a kilogram ($2,448 a metric ton), the highest close in a week. Futures reached the lowest settlement since August on Jan. 14.

The U.S. Federal Reserve said in its Beige Book business survey that “the economic outlook is positive in most districts.” International Monetary Fund Managing Director Christine Lagarde said yesterday momentum in the world economy in the second half of last year should continue in 2014.

“Rubber is being bought back as it looks undervalued given the positive outlook for global growth,” said Hideshi Matsunaga, an analyst at Evolution Japan Co., a broker in Tokyo.

The yen weakened for a third day to 104.92 per dollar, boosting the appeal of contracts denominated in the Japanese currency. Tire sales in Japan rose 11 percent to 3.8 million units in December from a year earlier, according to data from the Japan Automobile Tyre Manufacturers Association today.

Futures for May delivery on the Shanghai Futures Exchange gained 0.5 percent to close at 16,755 yuan ($2,768) a ton. Rubber free-on-board added 0.3 percent to 77.75 baht ($2.36) a kilogram today, according to the Rubber Research Institute of Thailand.

The Thai price was supported by speculation that supplies will be limited as the low-production season is due to start in major producing countries in February, said Korakod Kittipol, a marketing manager at Thai Hua Rubber Pcl.

--Editors: Jarrett Banks, Brett Miller