Tokyo and Shanghai rubber futures rose from Monday to Tuesday on the back of a weaker yen against the dollar and rising Asian stocks. However, continued weakening crude oil futures and a continuous fall of the Dow Jones Industrial Average from Monday through Friday had weighed down rubber futures and physical rubber markets for the rest of the week.
It is noticeable that a gradual rise of the benchmark prices on Tokyo rubber futures and a stable yen against the dollar since early July still remain, while Shanghai rubber futures fluctuate in a narrow range as well as physical rubber prices in the region as investors were worried about global economic uncertainties, and weak market sentiment still dampens investors’ confidence.
On the fundamental front, China’s official PMI rose to a 27-month high at 51.7 in July from 51.0 in June 2014. Rubber stocks in bonded warehouses in Qingdao fell to the lowest level since September 2013 at 262,100 tons as at 31 July 2014 versus 327,900 tons as at end June 2014. Crude rubber stocks in Japan were at 19,188 tons on 20 July 2014, down 2.1% from 19,599 tons on 10 July 2014. Production of cars, trucks and buses in Japan increased 6.6% year-on-year in June to 857,317 units, rising for the tenth consecutive month. The U.S. GDP growth accelerated to 4.0% in 2Q14, quarter-to-quarter, from a contraction of 2.9% in 1Q14.
On the rubber production front, tight natural rubber (NR) supply in the second half of 2014 should not be overlooked because El Nino is still likely. Low NR prices in the first half of the year also have forced rubber smallholders to abandon rubber plantations and to look for other alternative economic activities to make a living.
Therefore, NR prices are likely to improve in the coming weeks contributed mainly by the above mentioned factors.
– IRCo
