Weaker Tokyo futures dent physical prices

Asian rubber prices eased on Wednesday in thin trade as producers were not keen to sell while buyers held back on hopes of a further drop in prices.
Tokyo rubber futures fell on Wednesday, with the benchmark May 2006 contract down 4.0 yen per kg to 204.6 yen, after trading between 203.7 to 207.9 yen. Tokyo futures rose in the beginning of the week because of heavy rains and floods in Thailand, which hampered tapping of the trees in the world's top rubber producer and exporte.
"Funds came to sell because the gold and oil market has declined again.
It's not natural rubber factors, but other commodities factors," said another Singapore dealer at a leading trading firm.
Other contracts were in negative territory at between 1.5 yen to 3.6 yen lower. Gold fell to its lowest level in four weeks, while oil dropped slightly on Wednesday.
Traders said the downtrend should be limited in the near term because the flow of supplies in Thailand could take several weeks to return to normal. "Sooner or later the market will inch up, because Thailand has lost two weeks already because of the floods.
Another factor is the upcoming wintering season next year," said the second dealer. On Wednesday, there were no offers for Thai and Indonesian rubber as shippers preferred to wait and see where the market was heading later in the day.
Overnight, Thai RSS3 rubber sheet was quoted at $1.75 a kg, free on board, for January-February shipment.
Tyre-grade STR20 was also quoted at the same price.
"The market is too volatile right now, price idea is around $1.63 for February shipment, but no offers or bids so far," said one Jakarta trader referring to tyre-grade SIR20.
It was traded overnight at $1.66 a kg, free on board Begawan, in Sumatra Island, for March delivery.
Standard Malaysian Rubber 20, or SMR20, was offered lower at between $1.64 to $1.67 a kg on Wednesday, following Tokyo's losses, from $1.74 per kg on Tuesday.
On the Shanghai futures exchange, the most active March 2006 rubber contract, dropped 175 yuan to 17,745 yuan per tonne trading.