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TOCOM rubber hits 8-month low amid lingering worries about China

TOKYO (Aug 17): Benchmark Tokyo rubber futures fell to an 8-month low on Monday, tracking a drop in Shanghai futures amid lingering worries over weakening demand in the world’s top buyer China and as extended falls in oil prices darkened the outlook for commodity markets.

Tokyo Commodity Exchange (TOCOM) futures, which set the tone for tyre rubber prices in Southeast Asia, have lost more than 23 percent since hitting a 16-month high in early January, weighed down by worries about slowing demand in China and slumping oil prices which led to lower synthetic rubber prices.

The TOCOM rubber contract for January delivery <0#2JRU:> finished 3.7 yen, or 1.9 percent, lower at 190.2 yen ($1.53) per kg. It earlier fell to a low of 189.7 yen, the lowest since Dec 11, 2014.

“It seems that China remains a key focus for the market,” said Satoru Yoshida, commodity analyst at Rakuten Securities.

“The recent devaluation of the yuan was aimed at helping Chinese exporters, but it would hurt the country’s importers or reduce demand for imports of commodities including rubber,” he said.

Reflecting those worries, the most-active rubber contract on the Shanghai futures exchange for January delivery fell 225 yuan to finish at 12,150 yuan ($1,900.31) per tonne.

“Higher rubber stocks in Japan and softer oil prices also prompted some fresh sells,” Yoshida added.

Crude rubber inventories at Japanese ports stood at 16,241 tonnes as of July. 31, up 18.3 percent from the last inventory date, data from the Rubber Trade Association of Japan showed on Sunday.

Oil prices fell to near six-year lows on Monday as Japan’s economy contracted and producers in the United States added drilling rigs for a fourth straight week despite a recent rout in prices.

The front-month rubber contract on Singapore’s SICOM exchange for September delivery last traded at 132.1 U.S. cents per kg, down 2.3 cent.

($1 = 6.3937 Chinese yuan)
($1 = 124.5000 yen)

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