Asian rubber futures settled mostly lower Wednesday on long liquidation as investors booked profits before the annual closure of company accounts, but the International Rubber Study Group indicated that global demand is on the path of recovery while output has declined by the highest rate in 34 years.
On the Singapore Commodity Exchange, the TSR20 contract, which is benchmarked against SIR20, again traded at a premium to RSS3 contract. Traders cited tight supplies in Indonesia and strong demand in China as reasons for the role reversal.
However, prices of USS3 raw material in the three central markets of Thailand were lower and fell below THB84 a kilogram as daily availability has increased amid less rain.
The benchmark March contract on the Shanghai Futures Exchange settled 0.6% lower at CNY22,960/ton.
The benchmark July RSS3 contract on Agricultural Futures Exchange of Thailand settled THB0.70 lower at THB93.45/kg but off an intraday low of THB92.55. Most brokers put immediate support at THB93.
"Year-end liquidation pressure is driving down prices," said a trading executive at a Thailand-based commodities brokerage.
He said a further correction during this week can't be ruled out.
Prices briefly fell below THB93/kg, followed by mild speculative buying.
A lack of trading leads from Tocom also prompted investors to close positions, said a trader in Phuket. Tocom was closed Wednesday for the Emperor's birthday in Japan.
Total production of both synthetic and natural rubber combined is estimated to have fallen 11% during the January-September period, and only a small recovery is expected next year, the International Rubber Study Group said Wednesday.
"The last time a fall of this magnitude was recorded was in August 1975," the IRSG said in its latest report.
Analysts said dry weather in Indonesia, floods in Thailand, replanting activity in major growing regions, lower yields and unattractive prices during the first half of 2009 contributed to the decline in output.
Natural rubber production in 2010 is forecast at 10.40 million tons, up from a projected 9.4 million tons this year.
However, combined demand for synthetic and natural rubber has started to improve and is expected to rise 12% next year to 23.9 million tons.
Asian physical prices were lower in thin trade, traders said.
"There have been some purchases by dealers in South Korea, but most importers are waiting, as they hope Tocom rubber futures will decline further this week and pull down physical prices," said an analyst in Singapore.
STR20 traded at $2,900/ton, CIF South Korea, for January shipment, said a Thailand-based trader.
(Source: irco.biz)
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