FOREIGN TRADE: Japanized Rubber

Rubber Reserve Co., created last month by RFC, has the job of buying a 100,000-to-150,000-ton defense stockpile of rubber before Christmas at 18¢ to 20¢ a lb. Last week Rubber Reserve Co. made its maiden venture into the tough and jumpy spot-rubber market. The price moved forward to 20¢ and R. R. C., squealing, withdrew.

The bounce in the rubber market came from the Japanese. In the smelly raw-rubber markets of the Dutch East Indies and Malaya, whence comes 87% of U. S. rubber, Japs have overbid U. S. importers for weeks. Dutch rubber exports to Japan for the first half of 1940 (12,278 tons) were around the largest in history, nearly double those of the first half of 1939.

Japan’s own rubber needs (42,000 tons last year) are minuscule alongside the U. S.’s (575,000 tons). But U. S. rubber importers, irked by weeks of being over bid, do not think Japan is buying for Japanese consumption. They guess that Japan, shipping the rubber across Manchukuo and Russia, has become Germany’s purchasing agent. Germany, with all her substitutes, still needs 100,000 tons or more of natural rubber a year under war conditions.

If Jap buying increases, R. R. C. can still protect itself. When the price stays above the legal 20¢ for a reasonable period (two or three weeks) R. R. C. may invoke its contract with the Dutch-British rubber cartel, International Rubber Regulations Committee, which controls 97% of the world supply. I. R. R. C. will then be obliged to boost its quotas to the U. S., send the price down to where R. R. C. can enter the market again. This week, unscared R. R. C. announced that it would buy another 180,000 tons of rubber next year.