By Aya Takada and Yasumasa Song Feb. 16 (Bloomberg) -- Rubber prices in Shanghai may drop as much as 17 percent this year and drag down Tokyo futures after gains outpaced demand growth in China, the largest consumer, Global Broker Services Ltd. said. The Shanghai Futures Exchange price may drop to as low as 20,000 yuan ($2,930) a metric ton by the end of 2010 from 24,045 yuan on Feb. 12, Tetsuji Wakao, president of the Hong Kong-based commodities and securities broker, said in an interview. The Tokyo contract, the global benchmark, will move in tandem with the market in China, he said, without giving a specific forecast. Declining prices may benefit tire producers after rubber in Tokyo doubled in the past year as China led a recovery from the global recession. The nation’s vehicle sales growth may slow to 15 percent in 2010 from more than 40 percent in 2009, Miao Wei, vice minister of industry and information technology, said last month in Beijing. “Market participants in China are becoming cautiously bearish,” Wakao said in Tokyo yesterday. The rise in prices since mid-2009 was too rapid to sustain, he added. Wakao worked for Japanese commodity brokers including Unicom Group Holdings before joining Global Broker, which takes orders from Chinese hedgers for trades in Tokyo. July-delivery rubber on the Tokyo Commodity Exchange advanced 1 percent to settle at 286.9 yen a kilogram ($3,195 a ton). Prices reached a seven-week low of 265.6 yen on Feb. 9, after touching a 16-month high of 306 yen on Jan. 15, amid concern that sovereign debt problems may slow the economic recovery in Europe. Economic Growth Futures were also curbed by concern that China’s monetary tightening may slow economic growth, leading to weaker demand for rubber. The country’s central bank took the second step in a month to restrain inflation and damp asset prices, ordering lenders on the eve of a weeklong Lunar New Year holiday to set aside larger reserves. “China may raise interest rates later this year, which could curb investment and consumption,” said Kazuhiko Saito, chief analyst at commodity broker Fujitomi Co. in Tokyo. “That might be negative for the nation’s raw material demand.” Natural rubber consumption in China gained 11 percent last year, according to data from the Association of Natural Rubber Producing Countries. China’s rubber demand may rise 8.3 percent to 2.6 million tons this year, Wakao forecast, as the government puts priority on improving living standards in rural areas and promotes car ownership by farmers. Tire shipments by Chinese producers are expected to increase 7.3 percent to 244 million units in 2010, Wakao said, based on data from tire makers. Domestic sales are forecast to grow 9.2 percent to 165 million tires, while exports are likely to rise 3.9 percent to 78.7 million, he added. The country’s natural rubber demand may rise to 2.8 million tons next year and 3 million tons in 2012, Wakao said. China may consume similar synthetic rubber volumes, he added. Natural rubber imports are forecast to increase 9.1 percent to 1.8 million tons this year before reaching 1.98 million tons next year and 2.18 million tons in 2012, he said. To contact the reporters on this story: Aya Takada in Tokyo at atakada2@bloomberg.net; Yasumasa Song in Tokyo at ysong9@bloomberg.net.

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