New OMC rubber contract attracts interest
New OMC rubber contract attracts interest
SINGAPORE (Dow Jones): The Osaka Mercantile Exchange's new
technically specified rubber 20 grade futures contract has
attracted widespread interest and even excitement within the
rubber industry, but many participants will adopt a wait-and-see
approach when trading starts this week.
They want to see if the new contract can generate the high
level of liquidity enjoyed by the Tokyo Commodity Exchange's
rubber futures, and whether it can lure Japan's limited number of
speculators away from other futures contracts.
The contract, to be launched Wednesday, is Japan's first for
this grade, one that industry participants say is the most
actively traded in the physical rubber market.
Goodyear Tire & Rubber Co., the world's largest tire maker, is
known as a traditional TSR user, according to most dealers and
exporters. Cooper Tire & Rubber Co. and Pirelli SpA are also TSR
users.
Ribbed smoked sheet 3 grade is currently the sole rubber grade
traded on Tocom and the OME.
"I think the TSR20 contract would work because there are more
consumers of the TSR rubber," said Sanit Samosorn, managing
director of trade journal Rubber International and formerly an
advisor to Thailand's Department of Agriculture at the Ministry
of Agriculture & Cooperatives.
"In the future, TSR would be the more active material," he
said, adding that even Thailand is cutting its RSS production in
favor of TSR.
Thailand, the world's largest natural rubber producer and
exporter, has seen its RSS production fall to 940,700 metric tons
in 1999 from 1.1 million tons in 1994. Its TSR production rose to
466,400 tons from 299,500 tons during the same period, according
to the London-based International Rubber Study Group.
Indonesia, the second largest natural rubber producer, devotes
more than 90 percent of its 1.67 million tons annual rubber
production to TSR.
The new contract is "good news for the rubber market," said a
senior executive with a major producer of standard Indonesian
rubber 20 grade. SIR20 is the Indonesian grade of TSR20.
As the Japanese futures markets are more active than their
Singaporean and Malaysian counterparts, he hoped that there will
be enough speculators to activate the rubber market in general.
"There's a future for it because Japan has proven to be a good
place for investors," he said.
Apart from the Singapore Commodity Exchange which also lists a
TSR20 contract, RSS1 and standard Malaysian rubber 20 grade,
Malaysia's brand of TSR20, are listed on Malaysia's Commodity and
Monetary Exchange. But trading is listless.
Participants also hope that OME's TSR20 contract will provide
a better price discovery tool that either competes with or
complements Sicom.
An advantage of trading in Japan is a larger degree of
anonymity because it has many more brokers and trading members
than Sicom.
"Most people would like to trade on Osaka because it's open...
nobody knows what you're trying to do," said a dealer based in
Singapore.
Traders say the new contract's main drawback is that it's
denominated in yen, instead of dollars. The physical rubber
market is dollar-denominated.
SIR20 exporters in particular will now have to hedge their
positions in dollar-yen as well as dollar-rupiah, they said.
But exporters said they are willing to give the contract a shot
as long as it attracts enough liquidity.