Tokyo rubber futures surged to a 15-month high on Tuesday, with some contracts up the daily price limit of 5.0 yen per kg, as stop-loss buying emerged after the market broke through what traders saw as solid resistance. The December contract on the Tokyo Commodity Exchange (TOCOM) rose as high as 166.2 yen per kg, the priciest for TOCOM's benchmark rubber since March 15, 2004, when prices hit an eight-year high at 166.3 yen.
At the close, December rubber was up 2.7 yen at 165.3.
The September and October contracts ended limit-up, while other months gained 3.7 to 4.7 yen. "Short position holders were squeezed out as the key contract jumped beyond 165 yen, which many had believed was hard to break," a Tokyo broker said.
The market may be corrected lower in the short-term as the latest rally was too rapid, but the benchmark contract was unlikely to retreat below 155 yen given tight rubber supply and high oil prices, he added.
"The rubber market will stay on an upward trend, and it is difficult to predict how far prices will rise," he said. If the benchmark contract breaks last year's high at 166.3 yen, the next target will be 166.9 yen marked in May 1996, then 176.9 yen in March 1996.
The spot July contract rose as high as 182.9 yen on Tuesday, which was the priciest on a continuation basis since February 1995, when it hit 192.1 yen.
The record high for TOCOM's benchmark rubber contract is 388.9 yen set on February 13, 1980, while the historic high for TOCOM's spot rubber is 386.8 yen marked on the same date.
TOCOM rubber has been soaring due to a shortage in physical supply from Thailand, the top exporter of natural rubber, and record-low warehouse stocks in Japan.
Last week, the Rubber Trade Association of Japan said crude rubber stocks at private Japanese warehouses reached a record low of 10,367 tonnes as of June 20, down 2 percent from June 10 and more than 40 percent from the start of the year.
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