Asian rubber settled higher Thursday, rising to its highest level in more than 15 months on supply concerns and fresh speculative buying as Malaysia issued data on lower output and factories in Thailand faced tight local availability of raw material.
Physical prices of Thai USS3 raw material rose above THB95/kg as demand exceeded supply. Rubber factories even made purchases at THB96.5/kg outside the three central markets.
The benchmark June RSS3 contract on the Tokyo Commodity Exchange settled Y7.2 higher at Y303.8/kg after reaching an intraday high of Y304.4.
Prices rose further during the night session and the June contract hit a high of Y306/kg, a level not seen since September 2008. Night session prices aren't included in intraday trading.
"Supplies from Thailand have been tight, but this has been the situation for quite some time now," an executive at a Tokyo-based commodities brokerage said.
Speculative buyers who already have a large portfolio of long positions are pushing up prices further and the market is in overbought territory, he said.
Some traders advised caution at current price levels, as the building of new long positions should be avoided before a downward correction, but others continued to be bullish.
An exporter in Singapore said the increase in prices wasn't just speculative--lower production in Malaysia, Thailand is bullish.
Malaysia's estimate of natural rubber output in November was down 10% from a year earlier, according to government data released Thursday.
Traders put immediate resistance at Y305/kg, but that was broken during night session.
The benchmark August contract on the Agricultural Futures Exchange of Thailand settled THB1.60 higher at THB107.50/kg.
"Many factories are facing difficulty in executing their immediate rubber export orders because raw material availability is limited," said a Hat Yai-based trading executive.
They are reluctant to take "too many" orders from tire makers because of uncertainty over USS3 supplies, he said.
In the last quarter of 2009, rubber factories sold large volumes of RSS3 and STR20 rubber to tire makers abroad for early-2010 shipment at then prevailing prices, expecting market to turn bearish by December-January, when supplies usually rise during the peak production season.
However, unseasonable rains in recent weeks have reduced market arrivals and pushed prices up even further.
The benchmark May contract on the Shanghai Futures Exchange settled 1.3% higher at CNY25,775/ton. China is the world's largest consumer of rubber.
In other news, Vietnam may join the International Tripartite Rubber Council, to coordinate supply and price stabilization measures with other major producers, a person familiar with the matter said.
The ITRC comprises three of the world's top natural rubber producing countries--Thailand, Indonesia and Malaysia.
It's holding a ministerial meeting in Kuala Lumpur Jan. 19.
"One of the issues on the agenda is expanding ITRC membership to include Vietnam and further strengthen the group," the person said.
Asian physical rubber prices rose sharply on lack of availability of raw material and the sharp gains in futures markets.
However, high prices have started to reduce buying interest.
"It is like a pyramid, as prices go up the number of traders participating and volumes transacted fall," a top executive at a Singapore-based trading company said.
Rains have receded in major producing areas of Thailand and Malaysia, so output should begin to rise, but that needs to happen soon, before the dry wintering season starts.
(Source: irco.biz)
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