Asian rubber futures settled sharply higher Thursday as institutional funds shifted investments from currency markets to commodities and physical supplies were disrupted by rain, trade participants said.
To tackle tight supply and increased demand, the International Rubber Consortium will likely ease or eliminate controls on exports of natural rubber imposed last December, IRCo senior economist Yium Tavarolit told Dow Jones Newswires.
The physical prices of USS3 grade raw material in the central markets of Thailand rose above THB77 a kilogram. Some factories even offered to buy at prices around THB79.
The benchmark Tocom RSS3 April contract settled Y6.3 higher at Y244.7/kg, close to the intraday high of Y245.2.
Prices eased slightly in the night session, with the April contract ending at Y243.5/kg. Night session prices aren't included in intraday trading.
"The buzzword these days is to sell dollars and buy some other asset classes, including commodities such as rubber," said Avtar Sandu, manager for Asian commodities with Phillip Futures.
The rubber market was overbought due to buying by funds--fair value would have been closer to Y230/kg, he said.
The market is consolidating above Y240/kg, a Tokyo-based trader said, adding that rubber prices are gaining from both speculative investment and strong fundamentals.
IRCo, which comprises the world's three largest natural rubber exporters--Thailand, Indonesia and Malaysia--targeted an export reduction of 700,000 metric tons in 2009 after prices fell sharply late last year.
The program was put on hold in the current quarter, and a consensus might be reached to stop it during a two-day meeting of IRCo members in Langkawi, Malaysia, starting Friday.
"Export cuts were put in place when prices fell sharply and demand was weak," economist Yium said. "Now there is no reason to continue them."
The benchmark March contract on the Shanghai Futures Exchange settled CNY585 higher at CNY21,595/ton. China is the world's largest consumer of rubber by volume.
At the Agricultural Futures Exchange of Thailand, the benchmark June RSS3 contract settled THB0.80 higher at THB86.50/kg.
Asian physical prices moved up sharply due to tight supply, strong demand and gains in futures markets.
For most grades, prices have moved up by eight-10 cents/kg," said an exporter in Thailand. He said STR20 was sold to China at $2,600/ton, free-on-board for December shipment. Prices are moving up because there is demand even at these higher levels, said a Singapore-based trading executive.
(Source: http://irco.biz)
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