Tocom rubber to rise on tight Asian supply, traders
Tocom rubber to rise on tight Asian supply, traders
TOKYO (Reuter): The Japanese rubber futures market is likely to rise again soon due to persisting supply tightness in Southeast Asian countries, traders said yesterday.
"The natural rubber market is fundamentally bullish due to the continued tight supply. In my opinion, rubber prices have upward potential," a trader at a major trading house said.
Traders said the benchmark May contract on the Tokyo Commodity Exchange (Tocom) is expected to soon break near-term highs of 177.9 yen (US$1.75) marked in late November and will target 183.10 yen, the year's high hit in March.
Benchmark May futures on the Tocom closed today's morning session at 174.7 yen per kg.
Recent rainfall in rubber producing countries in Southeast Asia is causing a tightening of supply, the traders said. The rain is likely to continue until early next year, while rubber demand in Japan is good, they said.
More than 90 percent of the world's natural rubber is produced in Southeast Asia, notably in Malaysia, Indonesia and Thailand.
"Even if the weather conditions improve, the recent persistent rainfall could thwart rubber shipments to Japan," said Hiroshi Munakata, an analyst at Tokyo commodities brokerage house Asahi Trust Co Ltd.
Local industry officials said Japan's rubber stocks are steadily falling on strong demand for the tire sector, tightening domestic supplies.
Rubber stocks in private warehouses in Japan dwindled to 23,602 tons at end-November from 24,129 tons a month earlier, according to the Rubber Trade Association of Japan.
Stocks have declined for three consecutive months.
The Japan Automobile Tire Manufacturers' Association said Japanese rubber output for tires in October totaled 93,622 tons, up 5.4 percent from the same month last year and up 4.3 percent from September.
The gains were attributable to strong tire demand from Southeast Asian nations and Russia and the Middle East, as well as Japan, the association said. Tires account for nearly 70 percent of Japan's total rubber demand.
Japanese industry officials said volatile rubber trade is likely to continue for some time.
"The market is likely to be on an upward trend, while absorbing profit-taking," another analyst said.
Traders said that technically the market is turning slightly bullish after it recovered significantly this week from sharp declines last week.
The analyst said: "The rubber price recovery this week has been quite rapid, which means that in addition to the fundamental tone, technical conditions are favorable for market bulls."