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IRCo – Rubber Market Watch: 22 – 26 April 2013

By Yium Tavarolit

The Facts on the Rubber Market

Tokyo rubber futures fell around 25% from January 2013 to 26 April 2013, while physical rubber prices in Asia fell less than 20% during the same period of time. The benchmark RSS3 contract on Tokyo rubber futures has stayed lower than the physical RSS3, fob, Bangkok since 18 February 2013. In the meantime, Japan’s Nikkei rose by around 29%, and the yen weakened around 10% against the dollar. A question is why Tokyo rubber futures did not move in tandem with the weaker yen and the rising Nikkei during that period of time?

Also, the latest figure of Qingdao’s rubber stocks amounting to 368,500 tons is questionable until now. A Thai exporter told IRCo that the first one third of the total rubber stock there is of low quality. The second one third of the total rubber stock is under collateralized loans, and it can be sold only if rubber prices rise to certain levels that cover the collateralized loans. Only the last one third of the total rubber stock is of high quality.

Concerning natural rubber (NR) stocks in producing countries, A 300,000 tons NR stock under the Agreed Export Tonnage Scheme (AETS) withholding by Thailand, Indonesia, and Malaysiahave been delivered to consumers to fulfill long term contracts. A 200,000 tons NR stock under a Thai support Scheme is being used as a raw material in highway construction, agricultural dams, other agricultural facilities etc.

The Movements of Global Stocks, Finance and Energy

Most of Asian stocks remained in an uptrend during the week led by Japan’s Nikkei which settled at 1,582.24 on Friday after the Bank of Japan (BoJ) held off any new measures amid the weakening of the yen that boosted Japanese exports. In contrast, the Shanghai Composite index trended downwards throughout the week and finished lower at 2,177.91 on Friday, weighed down by the fall in HSBC’s preliminary purchasing managers’ index to 50.5 for April from a final reading of 51.6 for March.

European stocks dropped on Friday, breaking a five-day winning streak after the U.S. growth data fell short of expectations to 2.5% in the first quarter of 2013, missing expectations for a 3.2% climb. The Stoxx Europe 600 index dropped 0.3% to close at 295.89, after hitting the highest level since early April on Thursday. France’s CAC 40 index dropped 0.8% to 3,810.05, but ended the week 4.3% higher. The DAX 30 index slipped 0.2% to 7,814.76, ending the week 4.8% higher. The FTSE 100 index closed 0.3% lower at 6,426.42 Friday, but rose 2.2% for the week.

Wall Street trended upwards for the week despite the lower than expected economic growth data in the first quarter released on Friday. The Standard & Poor’s 500-stock index fell 2.92 points, or 0.2%, to 1,582.24, snapping a five-day streak of gains, and the Nasdaq Composite Index dropped 10.72 points, or 0.3%, to 3,279.26. However, the Dow Jones Industrial Average performed better, rising 11.75 points, or 0.1%, to 14,712.55.

A huge stimulus package unveiled at the start of April by the BoJ still keeps the yen to stay weak until the present. The dollar dropped as low as Y97.56 before ending the New York session at Y98.09, down 1.2% from Y99.25 late Thursday. The euro also edged higher on Friday to $1.3029 from $1.3011 late Thursday.

Light, sweet crude for June delivery on the New York Mercantile Exchange rose from $88.76 a barrel on Monday to $93.64 a barrel on Thursday before it would fall to $93.00 a barrel on Friday in the wake of the weaker than expected U.S. economic growth in the first quarter, according to Dow Jones Newswires.

Rubber Markets

Rubber futures and physical rubber markets in Asia fell from Monday to Tuesday mainly influenced by a fall in Shanghai futures prices, the news on a weaker HSBC’s preliminary purchasing managers’ index in April than in March in China, and profit-taking on Tokyo rubber futures.

The above two markets reversed their downward trend on Wednesday and continued rising steadily from Thursday to Friday on the back of rising Shanghai futures prices and the Dow Jones Industrial Average, firm crude oil futures, and the improvement in investors’ confidence amid tight NR supplies in the major NR producing countries, i.e. Thailand, Indonesia, and Malaysia. The table below shows that NR prices on both futures and physical rubber markets inAsia improved on Friday compared with an earlier Friday.

 

Description

26-Apr-13

19-Apr-13

Change

Unit

IRCo’s DCP

254.64

251.33

3.31

US cents/kg

TOCOM/RSS3 *

– May

247.00

240.20

6.80

Yen/kg

– Oct.

257.10

253.20

3.90

Yen/kg

– Volume

13,582

7,597

5,985

Lots

SHFE/RSS3 **

19,280

19,030

250

Yuan/ton

AFET/RSS3

– May

85.00

79.50

5.50

THB/kg

– Nov.

76.15

75.50

0.65

THB/kg

– Volume

182

180

2

Lots

SMR20 ***

251.00

246.00

5.00

US cents/kg

SIR20 ***

242.00

238.00

4.00

US cents/kg

RRIT

– RSS3

83.80

79.25

4.55

THB/kg

– STR20

72.90

71.20

1.70

THB/kg

– USS3

75.30

70.95

4.35

THB/kg

– Conc. Latex

59.85

58.10

1.75

THB/kg

– Field Latex

73.00

69.00

4.00

THB/kg

Notes: * the day sessions, the spot and benchmark months on 19 April were Apr. & Sep.

          ** the most active months on 19 and 26 Apr. were Sep. and Oct.

         *** offers, fob prices for May & Jun. deliveries

 

IRCo’s technical MACD and Signal Line continued improving in negative territory throughout the week, while its technical RSI also rose from 26.33% on an earlier Friday to 32.64% on Friday. These indicate that rubber market sentiment has improved to some degree.

Nonetheless, it is still confirmed that the current global economy is still turbulent and unpredictable, and daily movements of global stocks, commodities, currencies, and so forth are mostly influenced by market sentiment instead of the fundamentals. Therefore, NR prices on both rubber futures and physical markets can go any direction in the coming months.

Source: IRCo

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