Tokyo rubber higher

Tokyo rubber futures edged up on Thursday as tight supply continued to induce short-covering following losses the previous day, but the market faced some technical selling pressure.
Sentiment for Tokyo Commodity Exchange rubber futures was bullish both fundamentally and technically, but traders were careful about taking large buy positions especially after a major sell-off earlier in the month.
"The market is still very tight, which is keeping nearby contracts very buoyant," said Takashi Ogura, manager at Kanetsu Asset Management Co Ltd "Sentiment is bullish, but the market is nervous about building fresh buy positions from here after seeing big falls this month."
Key most distant December TOCOM rubber closed at 308.7 yen per kg, up 2.2 yen or 0.72 percent from Wednesday's close of 306.5 yen. It had moved in a range of 305.7 to 310.3 yen. The spot July contract closed up 3.3 yen or 1.04 percent at 322.0 yen.
Technical trend was strong with the key contract 1.5 percent above the seven-day moving average (MA) and 2.2 percent above the 14-day moving average. Sentiment was also lifted after the key contract filled in a chart gap to 309.1 yen in the week. But traders were cautious about taking new buy positions above 310 yen after the plunge in mid-June.
The key distant contract reached 324.5 yen, the high for a benchmark since September 1980, on June 13, but it fell as far as 280.4 yen on July 16.
"People don't want to take the risk of taking large positions on rallies after seeing the plunge," Ogura said. "I think there are plenty of bullish factors to rise again, but the market wants to avoid buying too heavily on rallies."
Physical rubber supplies have been tight, as unusually wet weather in Thailand in recent months has hindered tapping activity, pushing down output and forcing shipping delays. Chinese buyers and major tyre makers were eagerly seeking nearby physical rubber shipments, traders said.
"Supply is tight as the weather is not good. Demand is also strong with big tyre makers trying to buy July and August shipments," said a Singapore-based trader said. "In this kind of condition, rubber cannot fall sharply from present levels," he said.
Indonesia's SIR20 was at around $2.37 a kg FOB, little changed from $2.37-$2.38 the previous day. Malaysia's SMR20 stood around $2.50-$2.51 a kg, compared with $2.49 on Wednesday. The most-active September Shanghai rubber contract closed up 20 yuan per tonne at 24,665 yuan.