[16 Dec] Asia Rubber Futures Settle Higher on Physical Demand

Asian rubber futures settled higher Tuesday on fresh buying support as hedgers set up long positions against their sales in the cash market and increased use of natural rubber to make compound grades for sale to China, trade participants said.

Tight supplies in Indonesia are also pushing overall prices higher, with TSR20 recently trading at a premium to RSS3 at the Singapore Commodity Exchange being a reflection of strong fundamentals.

The benchmark May RSS3 contract on the Tokyo Commodity Exchange settled Y4.8 higher at Y253.2 a kilogram.

Prices eased slightly during the night session, with the May contract ending at Y252.9/kg. Night session prices aren't included in intraday trading.

"The recent fall in prices has spurred fresh demand in the cash market, which is also supporting futures," said an exporter in Singapore.

Singapore dealers and Thai shippers who are selling rubber in the physical market are taking long positions, he said.

Hedgers set up longs with selling targets in the Y253-Y255/kg range, a Tokyo-based executive at Okachi Corp.

There is also demand for natural rubber to be blended with a miniscule percentage of synthetic grades for making compound grades, which are then imported to China, traders said.

Compound rubber shipments to China have surged this year due to tariff-free imports from several major producers in Southeast Asia, a senior International Rubber Study Group executive said.

According to estimates by the Singapore-based IRSG, natural rubber content in China's compound rubber imports during the January-October period was around 742,000 metric tons compared with 364,000 tons during all of 2008.

"We are taking into account imports by China under two major custom categories--HS-400599 and HS-400591--to compile figures for natural rubber," said the IRSG executive, who didn't want to be named.

IRSG data don't account for imports under two other categories--HS-400520, which is in liquid form, and HS-400510, comprising around 55% synthetic rubber.

The benchmark March contract on the Shanghai Futures Exchange settled 1.1% higher at CNY21,730/ton.

Benchmark July RSS3 contract on Agricultural Futures Exchange of Thailand, settled 0.7%higher at THB89.35/kg.

Asian physical prices were higher on limited supply and strong futures gains. The initial buying interested ebbed as sellers continued to jack up their rates.

(Source: irco.biz)