This entry was posted on Friday, May 14th, 2010 at 9:23 pm and is filed under Rubber News. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.
SINGAPORE (Dow Jones)–Asia rubber settled mostly lower Friday as crude oil prices sank to a three-month low in overnight trade and continued moving in negative territory during trading hours.
The benchmark October natural rubber futures on the Tokyo Commodity Exchange settled 2.7% or Y7.2 lower at Y262.2 a kilogram, reversing Thursday”s gains as a stronger yen also weighed.
A stronger yen makes rubber imports cheaper in Japan, so investors take short positions on Tocom.
Weak crude oil prices and the yen”s strength Friday were in part due to lingering concerns over the euro zone”s debt. Crude oil is a key component of synthetic rubber, a competitor to natural rubber.
Tocom”s spot May and nearby June contracts however settled higher, likely on short covering, as supplies are still tight, so investors don”t want to be called on to make delivery on contracts.
Tocom rubber investors are very unlikely to set up new positions at this time of the month for the spot month contract unless they are extremely confident of delivery on time.
Tocom rubber is still in backwardation, with a difference of Y89.5 between the spot May and benchmark October contracts, signalling tighter supplies in the current market.
Backwardation occurs when the difference between forward and spot prices becomes less than the cost of carrying the commodity, or when there is no delivery arbitrage because the asset is not available for purchase.
Prices of RSS3 futures in the nearby months were also higher on the Agricultural Futures Exchange of Thailand.
Ribbed smoked sheet 3-grade futures on Tocom are expected to take cues from key external markets in the next session, said traders.
“Despite (any) upward movement, Tocom rubber will continue to be weighed on by euro-zone problems and fears of further fiscal tightening in China,” said a trader in Tokyo.
Benchmark Tocom rubber futures extended losses in the night session to close 0.6% or Y1.7 lower at Y260.5/kg. The night session is considered part of the next day”s trading.
Benchmark rubber futures on the Shanghai Futures Exchange settled 1.6% lower amid market rumors that the central bank will hike interest rates during the weekend to drain excess liquidity, said Orient Securities Futures analyst He Jing.
Asian physical rubber prices were mostly down on cues from the futures market. It was a relatively quiet trading day with scant buying interest, said various traders.
“Prices are coming off, so buyers seem to want to wait and see if prices fall even further,” said a Phuket-based exporter.
In other news, Malaysia”s natural rubber production in March totaled 70,318 metric tons, 48% higher than a year earlier but still lower than the 16-month high recorded in January, as seasonal wintering between February and April slowed latex output.
Asian Rubber Futures May 14 Change from previous close Tocom Oct RSS3 Y262.2/kg Down 7.2/kg Shanghai Sep SCR5 CNY21,985/ton Down CNY360/ton Thai Dec RSS3 THB90.25/kg Down THB2.55/kg Sicom Jun RSS3 366.5 U.S. cents/kg Up 1.5 U.S. cents/kg Sicom Jun TSR20 281.5 U.S. cents/kg Down 0.1 U.S. cents/kg
The following are physical prices in Asia, quoted in U.S. cents/kg, free on board.
Grade Shipment May 14 May 13 Bids Offers Bids Offers RSS3 Jun/Jul – 350-360 – 350-370 STR20 Jun/Jul – 305 – 295-305 SIR20 Jun/Jul – 277-278 – 282-284.5 SMR20 Jun/Jul – 281-283 – 289 USS3 May THB100.5-THB102.62/kg Closed
Source: Dow Jones