[02 Feb] Asian Rubber Settles off Lows; Heavy Sales in Physical Market

Asian rubber futures settled off lows Monday, breaking a six-day falling streak amid strong buying interest in the cash market and increased hedging activity, said trade participants.

Buyers in Europe and Singapore-based trading companies snapped up cargoes of several thousand metric tons to take advantage of the recent fall in prices. Natural rubber prices have declined by more than $200/ton in the last 10 days.

A Thailand-based company sold more than 2,000 tons of STR20 rubber at an average price of $3,010/ton, free on board and more than 500 tons of RSS3 rubber around $3,000/ton in several deals.

The decision by Thai factories to shift to spot market pricing from long-term contracts has also increased the number of deals in the physical market.

The benchmark July contract on Tocom settled Y1.1 higher at Y275.4 a kilogram, off an intraday low of Y272.5/kg.

Prices recovered again during the night session, with the July contract hitting an intra-session high of Y277.3/kg.

The market opened higher but couldn't sustain early gains due to a sharp decline in Shanghai rubber futures, which gave an arbitrage opportunity to investors.

"Shanghai rubber futures opened sharply lower today, prompting traders to sell Tocom, buy SHFE," said an executive at a Tokyo-based commodities brokerage.

He said once SHFE rubber recovered, arbitrage opportunities waned.

Due to tight supply in major growing regions, rubber's fundamentals are strong but concerns over China's tightening of credit are pressuring prices downward, said a trader in Singapore.

China is the world's largest natural rubber importer.

The benchmark May contract on the Shanghai Futures Exchange settled CNY520 lower at CNY22,675/ton, off an intraday low of CNY22,250.

The benchmark September contract on the Agricultural Futures Exchange of Thailand settled THB0.10 lower at THB99.90/kg, off an intraday low of THB98.30.

Asian physical rubber prices were lower but this prompted strong buying interest. In a role reversal, Thai STR20 sold at a premium to RSS3.

"Our company doesn't have enough raw material available to produce and export STR20 at a short notice; so, buyers have to pay a premium for shipment this month or in early March," said an executive at one of Thailand's largest rubber producing companies.

(Source: irco.biz)