Asian rubber futures settled higher Thursday, hitting their highest level in almost 15 months on speculative buying by institutional funds, but this damped buying sentiment in the physical market, trade participants said.
RSS3 rubber was offered at $2,920 a metric ton, free-on-board Bangkok but many buyers stayed away, expecting at least some correction by early next week.
Prices of the USS3 raw material in the three central markets of Thailand rose above THB85/kg as daily availability remained below 100 metric tons.
The benchmark May RSS3 contract on the Tokyo Commodity Exchange hit the first daily upper limit of Y10 per kilogram for the second successive day and settled Y8.3 higher at Y272.1/kg.
With prices rising by 7.5% in just two days, traders said a correction is likely before prices move up again.
As if on cue, prices eased during the night session, with the May contract ending at Y268.6/kg. Night session prices aren't included in intraday trading.
"There is heavy speculative buying, as investors expect a strong uptick in China's demand next year," said a broker in Tokyo.
On Wednesday, China announced a 38% cut in the import duty for RSS3 rubber, to CNY1,600/ton, which will help cushion a special 35% import tariff imposed on its tires by the U.S. in September.
Around 70% of the world's natural rubber is used to make tires.
The outlook for rubber is bullish, and prices might rise as high as Y280/kg next week, said Mitsubishi Corporation Futures & Securities senior analyst Shuji Sugata.
Higher crude oil prices are also supporting rubber, he said.
"Funds are buying aggressively. Yesterday, they were net long for 1,300 lots," said a Japan-based executive at a commodities brokerage, adding that said almost half the current long positions for rubber on Tocom are held by funds.
But the market is technically overbought, and at least some correction is expected, which could drag prices back toward Y260/kg before any test of Y280.
The benchmark March contract on the Shanghai Futures Exchange settled 2.8% higher at CNY22,985/ton.
Benchmark July RSS3 contract on Agricultural Futures Exchange of Thailand, settled 3.5% higher at THB95.55/kg.
Asian physical prices rose as traders continued to up their offers because of gains in futures markets.
Most major grades were offered above $2,850/ton, FOB, levels not seen in more than a year--but with few takers.
"We didn't transact any major deals today because regular customers decided to wait after hearing our offer price," said a Phuket-based senior executive at rubber manufacturing company in Thailand.
Global trading company Sri Trang International recently sold a total of 600 metric tons of RSS3 natural rubber to three buyers for physical delivery on the Singapore Commodity Exchange, a trading executive said.
Eastland Produce bought 300 tons of the rubber, free-on-board Bangkok, at a 1.5-cent discount to the Sicom December expiry price, which expired at 271.5 cents/kg.
(Source: irco.biz)
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