TOCOM rubber seen steady at 295.0 yen/kg at end-May

By Apornrath Phoonphongphiphat

 BANGKOK, May 6 (Reuters) - Tokyo rubber futures are expected to end May at 295 yen per kg, close to the actual level at the end of April, and likely to consolidate around that number after slipping recently from a 21-month high, a Reuters poll showed.

 Falls were likely to be limited despite the resumption of tapping in big producing countries because adverse weather has hampered output, dealers and analysts said.

 The poll was carried out over several days because of holidays in Tokyo and Thailand, and responses came before the drop in TOCOM on Thursday.

 The forecast of 295 yen for the benchmark six-month rubber contract on the Tokyo Commodity Exchange JRUc6, currently October 2010, compares with an actual 293.0 yen on April 30.  It is 7 percent lower than the forecast of 317.5 yen per kg in a similar poll at the end of April.  "I think TOCOM is in a consolidation phase after rising very fast in the past few weeks," said a trader in Thailand's Hat Yai rubber centre.

TOCOM rubber hit a 21-month high of 338.5 yen per kg in April when supply was tight for seasonal reasons and oil prices were firm, which makes synthetic rubber more expensive and tends to push up natural rubber.

 However, after a three-day holiday in Tokyo, the benchmark fell more than 6 percent on Thursday as global markets worried about the fallout from the euro-zone debt crisis.  "TOCOM rubber was always unlikely to stay at that high level for very long as the market factored in that the dry season was about to end and farmers have started tapping again," said a Singpore-based trader.

 The TOCOM benchmark was forecast to drop a little further to 290.0 per kg by the end of June, the poll showed.

 UNSEASONABLE DRYNESS

 Traders in big producing countries say rubber prices should not fall sharply in the near term, with physical rubber staying above $3.50 per kg until early June as supply is unlikely to rise significantly even though farmers started tapping from late April. 

Unfavourable weather has cut latex output, they said.  Low moisture at the end of the dry season in late April made rubber trees produce less latex, so supply was not expected to get back to normal very quickly, traders said.  "My understanding is that supply will stay tight in the physical market until late June," a Japanese dealer said.  Physical rubber hit a record high of $4.10 per kg in mid-April and then held close to that level before dropping sharply on Thursday in line with TOCOM. Thai RSS3 was quoted at $3.50 per kg, down 12 percent from Friday. It was forecast to be at $3.60 per kg by the end of May.  Malaysia SMR20 and Indonesia SIR20 could fall to $3.00 per kg from $3.38 and $3.26 respectively at the end of April.

(in.reuters.com)