Jan. 6 (Bloomberg) -- Rubber gained as a drop to near a six-week low lured buyers amid speculation that supply from Thailand, the largest exporter, may be disrupted because of heavy rains and flooding.
June-delivery rubber added as much as 0.6 percent to 269.6 yen a kilogram ($3,492 a metric ton) before trading at 269 yen on the Tokyo Commodity Exchange by 12:39 p.m. local time. The price yesterday dropped to 258.7 yen, the lowest since Nov. 24. It has gained 2.1 percent this week on signs of improvement in the U.S. economy, rebounding from a 4.7 percent drop last week.
Rain will increase in southern Thailand between Jan. 6-8 and may cause flash floods and landslides, the Department of Disaster Prevention and Mitigation said in a statement yesterday. Ten provinces in the southern region are flooded, it said. The south accounts for 80 percent of output.
“If floods cause disruption in rubber supply, that will boost prices as production is set for a seasonal decrease in coming months,” said Ken Kajisa, an analyst at broker ACE Koeki Co. in Tokyo, said today by phone.
Production declines in Thailand during the so-called wintering season starting around February, when trees shed leaves and latex output slows. Users usually replenish rubber stockpiles before the low-production season begins, Kajisa said.
Gains were limited as investor appetite for riskier assets waned after higher borrowing costs in a French bond auction stoked concern Europe’s debt crisis is worsening. France sold 7.96 billion euros ($10.2 billion) of debt, with borrowing costs rising in its first bond auction of the year, as credit companies threaten to cut the nation’s AAA rating.
May-delivery rubber on the Shanghai Futures Exchange was little changed at 24,425 yuan ($3,873) a ton at 11:02 a.m. local time. The Thai cash price dropped 0.9 percent to 104.95 baht ($3.32) a kilogram yesterday, according to the Rubber Research Institute of Thailand.
--Editors: Richard Dobson, Thomas Kutty Abraham
To contact the reporters on this story: Aya Takada in Tokyo at firstname.lastname@example.org Supunnabul Suwannakij in Bangkok at email@example.com
To contact the editor responsible for this story: Richard Dobson at firstname.lastname@example.org