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Rubber prices head south

(Agencies)
Updated: 2009-09-15 07:57

Rubber slumped by the most in eight months after US President Barack Obama imposed tariffs on tire imports from China, spurring concerns that demand in the world's largest consumer of the commodity may decline.

Futures in Tokyo fell as much as 7.8 percent, the biggest decline since Jan 13. The US imposed tariffs of 35 percent on $1.8 billion worth of tires from China, acting on a union complaint that imports were pushing US workers out of jobs.

"The news triggered sales of rubber futures," Kazuhiko Saito, chief analyst at Tokyo-based commodity broker Fujitomi Co, said. "The US action may not only weaken rubber consumption in China, but also have a negative influence on the global economy if retaliatory moves accelerate."

Related readings:  Rubber prices to rally on rising domestic car sales  China requires talks on US tire tariff  Obama Imposes Tariffs of 35% on Chinese Tire Imports

February-delivery rubber fell as much as 16.7 yen to 198.4 yen a kilogram ($2,195 a metric ton) on the Tokyo Commodity Exchange after a 10-yen drop triggered a circuit breaker system, leading to the suspension of trading for five minutes. The contract traded at 199 yen in morning trade.

January-delivery rubber on the Shanghai Futures Exchange tumbled by the daily price limit, or 5 percent, to 17,710 yuan ($2,594) a ton.

The European Central Bank said last week that rising protectionism may hamper world trade and undermine the global economy's recovery from recession.

Natural rubber demand in China is expected to rise by about 100,000 tons to 2 million tons this year, representing 20 percent of global consumption, Roka Komiya, a trader at the rubber section of Tokyo-based trading company Marubeni Corp, said.

China will increasingly rely on imports to meet rising demand because of a shortage of suitable land to boost domestic output, Komiya said. Domestic production may be as much as 600,000 tons this year, he added.

Rubber futures also tumbled as a slump in oil cut the appeal of the commodity, Fujitomi's Saito said. Crude oil fell for a second day on speculation its rally to $75 a barrel last month outpaced the rate of recovery in the global economy.