Rubber in Tokyo neared a 27-month high as futures in Shanghai surged by the daily price limit amid speculation that China, the world’s largest consumer, may step up purchases to replenish stockpiles.

The most-active contract on the Tokyo Commodity Exchange gained as much as 1.7 percent to 339.5 yen per kilogram ($4,206 a metric ton), nearing a 27-month high of 343 yen reached on Oct. 15, before settling at 337.5 yen.

Chinese buyers may increase imports after cash-rubber prices in Thailand declined and as wet weather curbed supply from domestic producers, said Kazuhiko Saito, an analyst at Tokyo-based broker Fujitomi Co.

“Chinese buyers may step up purchases, taking advantage of a drop in the physical market, as they are eager to replenish stockpiles,” Saito said by phone today. “China’s imports may also increase as rains constrained local output.”

May-delivery rubber on the Shanghai Futures Exchange advanced by the daily limit to 32,955 yuan ($4,952) a ton, nearing a record high of 33,000 yuan reached on Oct. 19.

Shippers in Thailand, the largest exporter, have reduced offers for so-called RSS-3 grade rubber for November shipment to about $3.94 per kilogram from $4 a week earlier, Saito said.

Natural rubber inventories increased by 3,880 tons to 41,681 tons, the highest level in six months, the Shanghai Futures Exchange said on Oct. 22, based on a survey of 10 warehouses in Shanghai, Shandong, Yunnan, Hainan and Tianjin.

China Buyers

“Chinese buyers are eager to add rubber to their stockpiles” before the wintering, or low-production season, starts in Thailand early next year, Saito said.

Torrential rains this month in Hainan after a severe drought in Yunnan at the beginning of this year, the top two producing areas in China, will reduce domestic rubber output, according to Guo Cheng, an analyst at Yongan Futures Co.

Natural-rubber imports by China jumped 19 percent from a month earlier to 190,000 tons in September as the country’s passenger-car sales to dealerships quickened from August on additional incentives for buyers.

Wholesale deliveries of passenger cars rose 19.3 percent to 1.21 million, accelerating from 18.7 percent in August, the China Association of Automobile Manufacturers said Oct. 12.

Rubber futures also gained as oil rallied for a second day, raising the appeal of the commodity as an alternative to synthetic products made from petroleum, Saito said.

Oil advanced on forecasts that the U.S. economy probably grew at a faster pace in the third quarter, signaling a recovery in fuel demand in the world’s biggest crude consumer.

Gains Limited

Gains in rubber futures in Tokyo were limited as the Japanese currency reached a 15-year high against the dollar, cutting the appeal of yen-denominated contracts.

Japan’s currency advanced on speculation the country will refrain from intervening in foreign-exchange markets to curb the yen’s strength.

G-20 officials pledged to refrain from “competitive devaluation” and to let markets set foreign-exchange values as they sought to calm fears that a trade war may break out if nations use cheaper currencies to spur growth.

“Japan is unlikely to do any intervention of a physical nature until after the G-20 meetings in November,” said Douglas Borthwick, Stamford, Connecticut-based head of trading at Faros Trading LLC.

Officials called for more sustainable current-account gaps as they ended talks in South Korea on Oct. 23. The G-20 Seoul Summit will be held on Nov. 11 and 12.

Source: Bloomberg

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