Rubber Futures Are Out Of Control

Tokyo and Shanghai rubber futures skyrocketed during the last four days on the back of persistent supply tightness in major producing countries and anticipation of higher prices in the coming months.

The most active May contracts on Tokyo and Shanghai rubber futures settled at 396.70 yen/kg and at 34,880 yuan/ton on 16 December before rising consecutively to finish at 413.10 yen/kg and at 37,275 yuan/ton on 21 December. At the same time, these two rubber futures markets pulled up cash prices in Thailand, Indonesia and Malaysia further.

 

DESCRIPTION	16 DEC	17 DEC	20 DEC	21 DEC	CHANGE **	% CHANGE	UNIT
IRCo's DCP	462.99	468.26	476.33	476.33	13.34		2.88%	US cents/kg
TOCOM/RSS3 *
- Dec. 10	386.50	389.00	398.10	405.00	18.50		4.79%	Yen/kg
- May. 11	396.70	398.60	408.80	413.10	16.40		4.13%	Yen/kg
SHFE/RSS3 ***	34,880	35,810	37,050	37,275	2,395		6.87%	Yuan/ton
AFET/RSS3
- Jan. 11	138.60	139.70	142.40	144.50	5.90		4.26%	THB/kg
- Jul. 11	140.60	143.30	145.85	147.70	7.10		5.05%	THB/kg
RRIT ****
- RSS3	141.30	141.80	144.30	146.80	5.50		3.89%	THB/kg
- STR20	139.25	139.75	142.25	146.25	7.00		5.03%	THB/kg
SIR20 *****	466.00	472.00	487.00	487.00	21.00		4.51%	US cents/kg
SMR20 *****	468.00	469.00	485.00	485.00	17.00		3.63%	US cents/kg

Source: IRCo

Note: * Day session

** Change between 16 and 21 Dec.

*** The highest daily trading volume was May 2011

**** RRIT means Rubber Research Institute of Thailand

***** Offer, f.o.b., Asian physical rubber prices for Jan./Feb. delivery, Dow Jones

We feel that rubber futures are now overdone and out of control, and speculators are waiting to liquidate their long positions for profit-taking when the time is ripe. It is noticeable that speculators are tying rubber futures to high crude oil futures for the time being on the top of strong market fundamentals and leave the Japanese yen behind.

If we still allow speculators to bully rubber futures like this, rubber futures are exactly the same as casinos that will hurt rubber manufacturers in the near future and rubber smallholders in the long-term.