TOKYO (April 19): Benchmark Tokyo rubber futures fell to a five-month low on Wednesday, extending losses for a fourth straight session and dipping below the key 200-yen level, hurt by oversupply concerns and a sharp drop in Shanghai futures.
“The market is under pressure due to weakening Shanghai prices as well as concerns over a supply glut as Songkran holiday in Thailand is over and output is expected to rise soon,” said Hiroyuki Kikukawa, general manager of research at Nissan Securities.
Rubber is tapped year round, but latex output drops during the dry wintering season, when trees shed leaves. Wintering in Thailand, the world’s biggest rubber producer, lasts from February to around May.
The Tokyo Commodity Exchange (TOCOM) rubber contract for September delivery finished 9.9 yen, or 4.7%, weaker at 203.0 yen (US$1.86) per kg, after touching its lowest since Nov 15 earlier in the session.
The most active rubber contract on the Shanghai futures exchange for September delivery dropped 395 yuan to finish at 14,385 yuan (US$2,089) per tonne. It earlier dipped to its weakest level since Sept 19 of 13,950 yuan.
“Now that the TOCOM has slipped below 200 yen, it may head down next to 150 yen, the level from where last year’s rally started,” said Kikukawa.
“Rubber prices in Tokyo and Shanghai had been boosted by speculators and should go back to where they were before the rally as speculators have now abandoned rubber,” he added.
The TOCOM futures, which set the tone for tyre rubber prices in Southeast Asia, began a rally late September, climbing from around 150 yen to nearly 370 yen by late January. But they have since then nearly halved.
The TOCOM’s April contract, which is due to expire next Monday, fell 17.5 yen, or 7.1%, to end at 229.0 yen per kg.
The exchange has urged any investors with open positions in April rubber futures to settle contracts well before expiration on April 24, with exchange inventories sitting at a level low enough to pose a risk of sudden price swings.
The front-month rubber contract on Singapore’s SICOM exchange for May delivery last traded at 152.9 US cents per kg, up 1.2 US cent.
(US$1 = 108.8600 yen)
(US$1 = 6.8869 Chinese yuan renminbi)