[03 Feb] Asian Rubber Settles Higher On Short Covering, Crude Oil

Asian rubber futures settled higher Tuesday, rising 3.6% to breach the crucial psychological level of Y285 a kilogram on the back of short covering amid strong physical demand and higher crude oil, trade participants said.

The benchmark July contract moved almost limit-up and traded as high as Y285.2/kg, Y9.8 higher than Monday's settlement. The first daily trading limit is Y10/kg.

The contract settled Y6.9 higher at Y282.3/kg.

Prices were steady during the night session, with the July contract hitting an intra-session high of Y284/kg.

"After more than a week of selling pressure, traders are now covering their shorts," said a Tokyo-based trading executive.

He said as prices rose above Y280/kg, many investors who held short positions rushed to cut their losses.

The strong demand in the physical market prompted many exporters to set up long positions.

Malaysia's natural rubber imports hit a record high of 718,000 metric tons in 2009, and the strong trend is likely to continue with a 26% projected on-year growth in the January-March quarter.

"If a country that is a major supplier to the global market sharply increases imports, even if partly for exports after processing, it is bound to support prices," said an exporter in Singapore who trades in Malaysian and Indonesian rubber.

He said while a large part of Malaysia's rubber imports are for processing for exports to China, local demand is also on the rise, particularly in the gloves industry.

Malaysia is the world's largest producer and exporter of gloves, for which latex rubber concentrate is the main raw material.

Latex concentrate accounts for more than half of Malaysia's total natural rubber imports.

The benchmark May contract on the Shanghai Futures Exchange settled CNY475 higher at CNY23,150/ton.

The benchmark September contract on the Agricultural Futures Exchange of Thailand settled THB1.75 higher at THB101.65/kg.

Asian physical rubber prices were higher as importers rushed in to book in cargoes.

Demand in the physical market was strong because importers expect prices to rise further as the wintering season sets in major growing regions of Thailand and Malaysia later this month when dry weather brings down yields.

(Source: irco.biz)