[17 Dec] Tocom Rubber Futures Rise 3.3% on China Import Duty Cut

Natural rubber futures on the Tokyo Commodity Exchange rose as much as 4.5% Wednesday, and settled above the first daily upper limit on expectations of fresh demand from China after it cuts rubber import duties on Jan. 1, trade participants said.

The benchmark Tocom May contract rose by the first daily limit of Y10 a kilogram and continued to rise when trading resumed after a brief halt. It traded as much as Y11.4 higher at Y264.6/kg, just short of the 14-month high of Y264.7/kg it hit on Nov. 27. The contract settled up Y10.6 at Y263.8/kg.

China's government said Wednesday that it will cut the import duty on natural rubber to CNY2,000 a metric ton from CNY2,600/ton. The tariff on smoked sheet rubber or RSS will be cut even more sharply to CNY1,600/ton from CNY2,600/ton.

Buyers who have been on the sidelines waiting for the 2010 schedule of taxes are now expected to re-enter the market.

"The general impression is that China was slow in buying for the last few weeks and may step up purchases early next year," said Chiaki Furui, chief executive of Bangkok-based commodities brokerage Agrow Enterprise.

Prices may quickly rise to Y270/kg as overall global demand for natural rubber is strong, he said.

Even though Thailand is in its high production season, there isn't any big surplus in the global market, Furui said.

There has been aggressive fund buying due to China's duty cut, said Nick Ng, Tokyo-based broker with Okachi Corp.

Somewhere between 1,000 and 2,000 lots of rubber have been bought by funds on Tocom following China's announcement of the cuts in duties, he said.

The market is overbought and a correction may take place in the night session when funds aren't very active and there may be selling by dealers in Singapore and Thai shippers, he said.

"It is hard to immediately push prices higher anymore," he said.

Chinese tire manufacturers have long been demanding cuts in import duties on natural rubber to reduce raw material costs. The reductions will cushion the impact of a special 35% import duty imposed by the U.S. on light Chinese tires in September.

However, sharp increases in natural rubber prices have partly offset the advantages of the lower duties.

Traders said there is also now an increased shift in China's imports towards compound rubber, with a tariff of zero, from major Southeast Asian growing countries.

(Source: irco.biz)