Japan rubber futures are likely to drift

Japan rubber futures are likely to drift

TOKYO (Reuter): Japan rubber futures are likely to drift higher this week, helped by growing worries that Indonesia's bush fires may hurt rubber output and shipments, analysts said yesterday.

Bush fires in Indonesia, triggered mainly by the clearing of land for farming, are being aggravated by tinder-dry conditions from El Nino, a weather pattern caused by warm current formations off the western coast of South America.

Analysts here said so far they had not confirmed the fires had damaged rubber trees, but worries that the fires would curb rubber supplies were emerging in the market.

"The fires could disturb Indonesia's rubber production and deliveries, and they might even damage rubber production in other countries in southeast Asia if they cause a negative change of climate there," said a commodity broker analyst.

"Speculative buying on the back of the fires was emerging on the rubber futures market," he added.

Indonesia's agriculture minister said last week he expected the raging bush fires to affect his country's rubber output.

Environmentalists monitoring satellite pictures of the sprawling archipelago said between 500,000 and 600,000 hectares were burning or had already been destroyed.

The fires have sent a health-threatening haze across neighboring Singapore, Malaysia and Brunei. The smoke drifted as far as the southern Philippines and parts of Thailand.

Another brokerage analyst said that the fires would have a limited impact on futures prices, as long as it was unclear if, and how, the fires would hurt rubber supplies.

Indonesia is the second biggest rubber exporter to Japan. In July, Japan's rubber imports from Indonesia totaled 14,284 tons, up from 10,685 tons in the previous month and 11,658 tons in July 1996.

Thailand, the biggest rubber exporter to Japan, exported 34,453 tons of rubber to Japan in July.

Yesterday, Japanese rubber futures prices rose due mainly to concerns over the Indonesian fires.

Benchmark March rubber futures on the Tokyo Commodity Exchange (TOCOM) were at 122.9 yen per kg yesterday morning, against Friday's close of 120.1 yen.

On the Kobe Rubber Exchange, benchmark March was quoted at 122.3 yen, against the Friday close of 119.9 yen.

Analysts expect March futures on TOCOM to move within a range of 115 yen to 126 yen per kg this week.

An unexpected fall in rubber inventories in Japan is also a positive factor for futures prices, analysts said.

The Rubber Trade Association of Japan announced on Friday that rubber stocks at Japanese private warehouses dropped to 26,564 tons as of September 20 from 28,289 tons as of Sept. 10.

Many analysts had expected rubber stocks to rise to above 30,000 tons as of Sept. 20.

Analysts said, however, they do not expect rubber stocks to keep falling, as Japanese trading firms increased the volume of their rubber imports under contracts earlier this year and such imports will soon reach Japanese warehouses.

Thai rubber to Japan was offered at 90 U.S. cents per kg on an FOB basis at the end of last week, against 88 U.S. cents from the previous week.

In the local physical market, benchmark Thai rubber for large- lot end users was quoted at 123 yen per kg at the end of last week, steady from a week ago.