Asian rubber futures settled higher Monday due to heavy rains in Thailand and Malaysia which are likely to slow down supplies over the next several weeks, said trade participants.
Physical prices of USS3 grade raw material in the central markets of Thailand traded above THB79 a kilogram. Some factories even offered to buy at prices above THB80 because rains have slowed down production and supply is scarce.
The Tokyo Commodity Exchange was closed for a public holiday, but a cross-section of traders told Dow Jones Newswires that prices may rise above Y250/kg after trading resumes Tuesday.
The concerns over supply were serious enough for traders to shrug off a sharp fall in China's natural rubber imports.
Physical prices moved higher and drove up futures markets as well.
On the Agricultural Futures Exchange of Thailand, the benchmark June RSS3 contract settled THB2.95 higher at THB89.95/kg.
"Demand isn't very high, but the problem relates to supply," said an exporter in Singapore.
He said many suppliers are reluctant to commit large volumes despite attractive prices as they may not be able to deliver due to a lack of raw material.
Prices of all major grades have converged due to tight supplies, said a Malaysia-based trader.
He said the earlier discount for Malaysian and Indonesian grades to that of Thailand is hardly available because of the tight supply.
Traders said due to the monsoon season, the supply situation is unlikely to improve anytime soon.
High inventories and weak demand have dragged down China's natural rubber imports.
According to government data, natural rubber imports in October fell 37% on month to 101,721 tons from 161,336 tons in September. Imports were 35% down on year.
China's "domestic demand for tires is robust, but exports have been affected due to U.S. tariffs," said a natural rubber exporter in Singapore.
He said high stocks in warehouses are also affecting purchases. China's rubber stocks have more than trebled since end-June and are now estimated close to 134,000 tons in warehouses tracked by the Shanghai Futures Exchange.
The benchmark March contract on the Shanghai Futures Exchange settled CNY300 higher at CNY21,840/ton.
China is the world's largest consumer of rubber by volume.
(Source: http://irco.biz)
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