[30 Jan] Asian Rubber Mixed; Drop In Long-Term Contracts Supports

Asian rubber futures settled mixed Friday, with Thai rubber factories canceling or not renewing long-term contracts with tire makers supporting prices but concerns lingered over tightening of liquidity in China, said trade participants.

A fall in the number of long-term physical sale contracts can push up demand in the spot market; it helped in the recovery of Tocom prices during the night session, they said.

The benchmark July contract on Tocom settled Y0.5 lower at Y274.3 a kilogram after reaching an intraday high of Y279.9.

Prices recovered again during the night session with July contract hitting an intra-session high of Y278.1/kg.

"While the insistence of Thai companies to trade on spot prices and shun long-term deals is supportive concerns over China's liquidity levels and tightening of monetary policy are keeping a check on further gains in the market," said an exporter in Singapore.

He said these factors are pulling prices in different directions.

Many investors no longer have confidence to keep long positions open overnight and therefore quickly took profits, said a Tokyo-based executive at commodities brokerage.

Exporters said renewals of Thailand's long-term rubber trade contracts in January are down by at least 50% from a year earlier in terms of volumes traded.

The shift in trade towards spot market deals from long-term contracts is significant because it is resulting in more demand in the cash market and is supportive for prices in the medium term, they said.

The number of long-term contracts by Thai rubber suppliers has reduced a lot this year, said Pongsak Kerdvongbundit, managing director of Von Bundit Ltd., Thailand's largest manufacturer of natural rubber.

"Prices in long-term contracts are mostly lower than spot prices which are on the rise. Therefore, most factories are refusing to do long-term contracts," he said.

A top executive of a major Thai producer said his company has reduced the volumes traded under long-term contracts by almost 50% in 2010 and such contracts now have hardly a 10% share in the company's total natural rubber trade.

The benchmark May contract on the Shanghai Futures Exchange settled CNY50 higher at CNY23,195/ton.

The benchmark September contract on the Agricultural Futures Exchange of Thailand settled THB0.95 lower at THB100/kg.

Asian physical rubber prices were higher on strong buying interest and concerns that Thailandhas cut down volumes traded under long-term contracts.

(Source: irco.biz)