Rubber contracts in Tokyo and Shanghai dropped to lows not witnessed since 2009 on concerns that a weak growth of the economy in China will reduce demand for the commodity despite a global surplus.
September delivery contract exchanged at 206.4 yen per kilogram or ($2,016 per metric ton) after falling 4% on the Tokyo Commodity Exchange. That’s the lowest price for rubber since October 2009. September delivery contracts on the Shanghai Futures Exchange fell 4.1% to trade at 14,200 yuan or $2,282 a ton, the cheapest close since April 2009.
Tokyo’s blue-chip futures lost for a fifth week as China’s economy steadied at the slowest pace in six quarters and growth of new home prices eased throughout the country last month amid dwindling availability of credit, Bloomberg reports.
A global overproduction in 2014 will beat figures estimated in December by 78%, as shown by The Rubber Economist Ltd. Rubber, which is used in the manufacture of tires hit a bear market in January and has declined 25% year-to-date.
“Amid a lack of positive news from China, the selling of futures increased. The price slump accelerated after large-lot sell orders from speculators overseas,” said analyst Gu Jiong of Yutaka Shoji Co.
Researcher Takaki Shigemoto of JSC Corp believes a weak Chinese economy might escalate a global surplus.
The Rubber Economist showed that a global rubber glut for 2014 is estimated at 652,000 tons, an adjustment from 366,000 tons forecasted in December, as production in the world’s largest grower Thailand beats forecasts. Based in London, the industry consultant adjusted upwards its estimates for global production last year by 3.8% to 12.04 million tons.
According to Bangkok Post, Free-on-board Thailand rubber slid 1.4% to 71.45 baht or 2.2 US dollars per Kilogram on Saturday. Prices have dropped 2.1% this week, the deepest plunge since the period through February 7. To register for a free 2-week subscription to ForexMinute Premium Plan, visit www.forexminute.com/newsletter.
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