Tokyo rubber futures fell more than 1 percent to a two-month low on Monday, as deteriorating technical charts and growing concerns that an economic downturn will erode tyre demand hit market sentiment.
Worries about sluggish economic growth have put downward pressure on rubber, despite a rise in crude oil prices, which has been a key factor providing the recent rubber market with direction, a Japanese trader said.
"It is the same concern that hit platinum today, which has fallen by the daily (300 yen) limit due to concerns about a decline in industrial demand," he said. General Motors Corp posted a $15.5 billion quarterly loss on Friday, sparking worries about demand for platinum, which is used in auto catalysts, and rubber, the bulk of which is needed to produce tyres. The key Tokyo Commodity Exchange rubber contract for January delivery stood at 322.3 yen per kg at 0500 GMT, after earlier falling to 321 yen, down 4.8 yen or about 1.5 percent.
The trough marked the lowest for a benchmark rubber contract since June 5. The Tokyo trader said now that rubber has fallen below the 324-yen level, which he took to be a line of support, the next support line is likely to be around the 313-yen level hit in June.
US crude rose above $126 a barrel on Monday on worries about disruption to supplies, including further violence in Opec member Nigeria and a tropical storm forming near the Gulf of Mexico. The most active Tokyo platinum contract tumbled by the daily 300 yen limit on Monday on fears of falling demand from carmakers due to a slowing US economy. Asian physical rubber prices fell on Monday, pressured by the decline in Tokyo futures prices and an increase in physical supplies.
"The overall economic situation is not very good and so I would say demand might slacken down a little bit, but at the same time the Chinese do not have much stock of latex and are more or less running on hand-to-mouth and so they will obviously buy," a trader based in Thailand said. He said that the Chinese were coming into the market to buy small quantities.
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