Natural rubber futures fell sharply to their lower limits Friday across major bourses in Asia , as long positions were liquidated amid a broad commodities sell-off on fresh concerns over the health of the global economy, said trade participants.
Dubai World seeking a reprieve on its $60 billion of debt, a recovery in Japan's natural rubber inventories from historically low levels, a significant strengthening in the Japanese yen and the International Rubber Consortium's decision to lift curbs on exports combined to erase all the gains rubber futures made this week.
The benchmark May RSS3 contract on the Tokyo Commodity Exchange hit limit-down and continued to fall after a resumption in trading. It settled Y11.9 lower at Y241.2 a kilogram, close to the intraday low of Y239.7/kg.
Prices recovered slightly during the night session, and the May contract ended at Y244.5/kg. Night session prices aren't included in intraday trading.
"The market is on a roller coaster ride. Declines in gold and crude oil prices have dragged down rubber as well," said an executive at a Tokyo-based commodities brokerage.
Strength in the yen also prompted long liquidation on Tocom, he said.
The sell-off started as profit taking but as the decline continued, many investors panicked and liquidated positions to stop losses.
The U.S. dollar hit a 14-year low against the yen around Y84.82. A stronger yen makes natural rubber imports cheaper and drags down Tocom rubber futures.
"The market has been driven by shocks in Dubai
IRCo's decision to lift export curbs has had a psychological impact, but supply-demand fundamentals are still tight, he said.
"It's a step in the right direction. There isn't any need to restrict exports because demand is strong," said Furui.
IRCo's members are Malaysia , Indonesia and Thailand
Prices are high and more supply is needed, so IRCo had to eliminate the export curbs, said Pongsak Kerdvongbundit, managing director of Von Bundit Ltd., one of Thailand
"Rubber prices had been rising continuously and there hadn't been a correction for a long time," Pongsak noted.
The losses in Tocom rubber futures had a contagion effect on other bourses.
The new benchmark July RSS3 contract on the Agricultural Futures Exchange of Thailand fell by its daily lower limit of THB3.0 to THB88.10 a kilogram, triggering a halt in trading. The daily trading limit will be widened to THB3.75/kg when trading resumes Monday.
The benchmark March contract on the Shanghai Futures Exchange settled 2.7% lower at CNY21,545/ton.
"The market was in overbought territory for several weeks now, and IRCo's decision is just a pretext to take profits before another round of buying begins," said a broker in Japan
Natural rubber stocks in Japan
Japan's natural rubber stocks had declined to historically low levels as of Nov. 10 and are still 53% lower than at the end of May.
Tight supply in Thailand and Indonesia, the world's top producing and exporting countries, along with strong demand from tire makers in Japan may have prompted buyers to aggressively replenish stocks to avoid any scarcity over the next few months, traders said.
Until early this month, factories were using up existing inventories, which are cheaper than new purchases, as prices hit 13-month highs in November.
Asian physical rubber prices were lower, tracking a sharp fall in futures markets amid thin trade.
"Traders lowered their offers marginally after the slump in futures but are reluctant to give any major discount because physical supply is still tight," said a Thailand-based exporter.
Trading was thin as major growers Malaysia and Thailand Thailand 's STR20 grade compound rubber was sold to a buyer in Japan
(Source: http://irco.biz)
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