TOKYO (Dec 4): Benchmark Tokyo rubber futures surged to their highest in more than two months on Monday, buoyed by a rally in Shanghai futures after a fire outbreak at a warehouse in China last week, while a softer yen against the U.S. dollar also lent support.
A warehouse storing rubber products in a logistics park in China’s eastern Shandong province caught fire on Friday, damaging 36,000 tonnes of rubber inventories, according to the Shanghai Futures Exchange.
That represents about 11% of rubber inventories in warehouses monitored by the Shanghai Futures Exchange.
“The fire prompted fresh buying in Shanghai and Tokyo,” said Hiroyuki Kikukawa, general manager of research, Nissan Securities.
The Tokyo Commodity Exchange (TOCOM) rubber contract for May delivery finished 5.8 yen higher or 2.9% at 209.3 yen (US$1.85) per kg. Earlier in the session, it touched 210.3 yen, the highest since Sept 28.
The most active rubber contract on the Shanghai futures exchange for May delivery soared 610 yuan to finish at 14,925 yuan (US$2,255) per tonne, after reaching the highest since Sept 21 of 15,020 yuan.
“Floods in southern Thailand, which may affect rubber output or shipment and the recent news of Asian producers curbing rubber export were also behind the market rise,” Kikukawa said.
Asia’s top rubber producers have agreed to cut exports of natural rubber from the middle of December, the International Rubber Consortium (IRCo) said late November, in a bid to address declining global prices.
Also on the upside, the dollar was broadly higher on Monday, reaching a 2-1/2-week peak against the yen, lifted after the U.S. Senate approved a tax overhaul at the weekend.
A weaker yen makes yen-denominated assets more affordable when purchased in other currencies.
“I think rubber prices have hit a bottom and the TOCOM is expected to climb toward 220 yen,” he said.
The front-month rubber contract on Singapore’s SICOM exchange for January delivery last traded at 148.7 U.S.
cents per kg, up 3.2 cents.
(US$1 = 112.8700 yen)
(US$1 = 6.6175 Chinese yuan)
