Asian rubber prices rallied on Thursday, buoyed by sharp gains in Tokyo futures and healthy consumer demand amid tight supply from major producing countries.
Rubber futures on the Tokyo Commodity Exchange, which sets the trend for the regional physical market, closed higher on short covering and a technical rebound after plunging to a six-week low.
The benchmark sixth month TOCOM rubber contract August closed up 4.1 yen at 249.1 yen ($2.12), after dipping to 238.9 yen, the lowest since January 25.
The benchmark contract hit a 22-year high of 274.9 yen in February. "There was short covering as it fell too much in the past several sessions," said a dealer with a major Japanese brokerage in Tokyo. "Fundamentals are still strong."
Dealers said supply was tight in Thailand, the world's largest rubber producer, during the wintering season when rubber trees shed leaves and yields are low. Thai benchmark RSS3 rubber sheet for April shipment was at $2.07 a kg, free on board, against $2.05 on Wednesday.
Tyre-grade Standard Thai Rubber, or STR20 block, for April shipment rose to $2.00 a kg from $1.98 the previous day. Offers for Thai 60-percent concentrated latex in drums were unchanged at $1,600 a tonne for April shipment.
The selling price of Thai benchmark unsmoked rubber sheet grade 3, or USS3, the raw material for export-grade rubber, was also unchanged at 75.0 baht ($1.92) a kg. "There are some buying interest from China," said a Thai dealer in the southern town of Hat Yai.
"But they (Chinese buyers) are more likely to seek rubber from Indonesia and Malaysia. Nothing has changed much in the market (for Thai rubber)." A trader in Singapore said the market for Indonesian and Malaysian rubber was a very active, with demand from Chinese buyers and major tyre maker picking up.
On Thursday, offers for Malaysia's tyre-grade SMR20 jumped to $1.96 a kg free on board for April shipment from Wednesday's $1.92, he said. Offers for Indonesia's tyre-grade SIR20 rose to 86.5 US cents per pound ($1.91 a kg) for April shipment from 85 cents.
"Today move's on TOCOM was about 12 yen for the benchmark month. It's very frightening," the Singapore trader said. "It's overdone on the way down. In fundamentals, the undertone is still a bit bullish."
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