Tokyo rubber ends limit down

The key Tokyo rubber futures contract on Monday closed down by its daily limit because of a firmer yen and softer crude oil prices, and traders said the market was likely to stay weak given ample long-term supplies.
The benchmark, most distant, February 2007 rubber future on TOCOM finished down by the 10-yen limit at 232.1 yen ($1.98) per kg the lowest level for a key TOCOM rubber contract since mid-January. The day's high was 240.5 yen. "It's not just the fundamentals, market sentiment is really looking very poor," a Tokyo broker said.
Four of the six rubber contracts traded on the Tokyo Commodity Exchange finished by the 10-yen daily limit. The September contract, which expires this month, no longer has a limit.
Oil prices remained under $70 a barrel, after slipping nearly 5 percent last week as the season's first hurricane proved a false alarm and United States oil inventories increased. Jitters over Iran's nuclear dispute with the West kept losses in check. Traders watch the oil market closely as lower oil prices slow a shift in demand to natural rubber from synthetic rubber, a petrochemical product.
Improving supplies from South East Asia also weighed on TOCOM rubber prices and dampening the long-term outlook. In the physical market, the tumbling Tokyo rubber futures hit rubber prices.
Regional traders were also anticipating weakness long-term for the physical rubber market given the abundance in supplies. "In the short term, there may be a rebound because the market's oversold, but in longer term the market still doesn't look good," a dealer in Thailand's southern city of Hat Yai said. He added that some Chinese traders might step into the market to buy.
The market was abuzz last week with talk that some Chinese buyers might have defaulted on contracts in which they paid up to $0.80 US cents per kg more than the current market price.
Most buyers, however, are expected to keep a low profile in anticipation of a further decline in prices. Tyre-grade Standard Thai Rubber, or STR20 block and benchmark Thai RSS3 rubber sheet for October shipment were both valued around $1.97 per kg free on board.
Late last week, the grades cost between $1.99 and $2.00. A trader in Singapore said Indonesia's tyre-grade SIR20 was bid at 89 cents last on Friday, and current prices were likely to be below that level given TOCOM's sharp tumble. Malaysia's tyre-grade SMR20 was estimated at below $2.00 compared with last on Friday, when it was offered between $2.00 and $2.02. On the Shanghai futures exchange, the most active November contract closed down 730 yuan at 19,160 yuan ($2,409).