SINGAPORE (Dec 29): TOCOM rubber dropped to a one-month low on Tuesday, stretching its losses into a fourth consecutive session, as slowing demand from top consumer China and weakness in crude oil weighed.
The Tokyo Commodity Exchange rubber contract for June delivery <0#2JRU:> fell as much as 4.3 yen to hit an intraday low of 155.7 yen per kg, the lowest since Nov. 25. The market closed down about 2% at 157 yen per kg.
“Falling crude oil prices is the main reason for decline in rubber,” said Jiong Gu, an analyst at Yutaka Shoji Co,referring to more than 3% decline in crude oil prices on Monday.
“Also, I think the market had rallied from a low of 153 in November, so longs are taking profit and closing their positions ahead of the year-end break.”
Tokyo rubber prices climbed more than 14% to 174.8 yen at the beginning of December from a six-year low of 153 yen in November.
Crude oil prices remained under pressure on Tuesday as fears of slowing demand added to worries over near-record global production levels that have slashed prices by two-thirds since the middle of last year.
Natural rubber prices often follow moves in crude oil as the commodity competes with synthetic rubber, a petrochemical product.
The market is concerned about slowing economic growth in top consumer China.
Rubber inventories in warehouses monitored by the Shanghai Futures Exchange rose 2.4% from the previous week, the exchange said on Friday.
China’s slowing growth has impacted several industrial commodities, including base metals and iron ore.
“Before December we have many long Tokyo and short Shanghai and now they are just closing their positions, selling Tokyo and buying Shanghai,” Gu added.
The most-active rubber contract on the Shanghai futures exchange for May delivery gained 50 yuan to 10,520 yuan per tonne.
The front-month rubber contract on Singapore’s SICOM exchange for January delivery traded at 115 US cents per kg, down 1.7%.
