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Thursday, August 11, 2022

Asian Rubber Settles Sharply Lower As Tokyo Contracts Slump

Asian rubber settled sharply lower Thursday as bellwether Japan rubber slumped to a 17-and-a-half-month low due to stop-loss selling, traders said. Tokyo rubber has been hitting new lows in the last week due to global macroeconomic concerns.

Benchmark July natural rubber on the Tokyo Commodity Exchange Tocom rubber settled 4.7% lower at Y210.1 a kilogram after hitting an intraday low of Y210/kg on stop-loss selling orders, said a Singapore-based trader at a Japanese brokerage.

“Rubber market sentiment is very bad; Shanghai Futures Exchange will resume trade tomorrow (after the Lunar New Year holidays) and I think prices will likely open lower because they were already weak before the break,” said the trader.

He added his customers were selling even though technical indicators point to Tocom being oversold, but there were no bullish factors pushing prices up, causing sharp price falls this week.

There was also talk of hedge funds selling down on Tocom, a Singapore-based analyst said.

International Rubber Consortium Chief Executive Yium Tavarolit said in a note this week that member countries are monitoring the situation closely and “will take appropriate action in the near future if and when necessary.”

Member countries have collectively cut exports in the past to stem sharp price declines. The three member countries of Thailand, Indonesia and Malaysia account for over two-thirds of global natural rubber output.

Tocom rubber has fallen as much as 23% year-to-date.

July Tocom rubber rebounded in the night session, closing Y4.4 higher at Y214.5/kg, giving some relief to participants who were hoping for a China-led rebound Friday, when investors start returning from their Lunar New Year break. The night session is considered part of the next trading day.

Physical rubber prices were also sharply lower, tracking the slump in rubber futures, but this was boosting bargain hunting on the physical market, said a Singapore-based dealer.

“Everybody is buying more than usual because prices have dropped so much. SIR20 in particular has suffered huge losses due to a sharp decline in the Indonesian rupiah, which drags prices in all other block rubber grades,” he added.

Dow Jones

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