Markets

Rubber declines on slow vehicle sales

By Aya Takada (China Daily)
Updated: 2010-06-03 09:34

TOKYO - Rubber declined for a second day as a slowdown in China's car sales stoked concern that demand may drop from the biggest consumer of the commodity used in tires.

Futures in Tokyo lost as much as 5.6 percent to the lowest level since May 27 also after data showed on Tuesday manufacturing growth in China and the euro region weakened in May, stoking speculation the economic rebound may be slowing.

China's passenger-car sales growth slowed last month as falling stock prices eroded wealth and consumer prices rose in the world's largest automobile market. The Shanghai Composite Index fell 9.7 percent in May.

"The market is weighed down by concern about the global economic recovery as data from China showed a slowdown in growth," Hisaaki Tasaka, an analyst at Tokyo-based broker ACE Koeki Co, said on Wednesday.

"Rubber may extend losses in tandem with other industrial materials."

Rubber for November delivery, the most-active contract, fell as much as 15.7 yen to 266.5 yen per kilogram ($2,909 a metric ton) before settling at 269.2 yen on the Tokyo Commodity Exchange.

China's sales of cars, sport-utility vehicles and multipurpose vehicles rose 25 percent from a year earlier to 885,800 last month, the China Automotive Technology & Research Center said on Tuesday.

That compares with 34 percent growth in April, according to the center.

The data came out after the Tokyo exchange closed on Tuesday.

A "diminishing wealth effect" from Chinese stocks, along with high gasoline prices, may contribute to a slowdown in auto sales, Credit Suisse Group AG analysts Adrian Chan and Hung Bin Toh wrote in a report last week. Vehicle sales could decline from year-earlier levels in the second half of 2010, they said.

Related readings:  Rubber rises for 2nd day  European aid gives rubber a bounce  Drought takes bounce off rubber growers  Rubber demand up on vehicle sector expansion

Losses in rubber futures were limited as the yen dropped after Prime Minister Yukio Hatoyama told lawmakers he would resign, damping the allure of the currency as a haven. A weaker Japanese currency raises the appeal of yen-based contracts for the commodity traded globally in dollars.

The yen slid to 91.63 per dollar from 90.94 Tuesday in New York. Ichiro Ozawa, the ruling party's No 2 official, will also step down, Hatoyama said on Wednesday.

September-delivery rubber on the Shanghai Futures Exchange lost as much as 4.2 percent to 21,620 yuan ($3,165) a ton, the lowest level since May 21, before settling at 22,005 yuan a ton.

Bloomberg News