Tokyo rubber futures rose more than 2 percent to around 289 yen a kg on Wednesday as bargain hunters resurfaced after a technical drop the previous day, while a jump in crude oil also helped.
Tyre-grade tracked gains in Japan but the higher prices scared off buyers, with the market abuzz with talk that many Chinese consumers had turned to cheaper domestic stocks held in the ports of Shanghai and Qingdao.
"Consumers in the US, Europe and Singapore start to complain because of the high price. Buyers refuse to give me any price indications today," said a dealer in Pekanbaru, the provincial capital of Riau in Sumatra.
Indonesia's tyre-grade SIR20, which has risen more than 10 percent since early January, was traded late on Tuesday at 92.75 US cents per pound ($2.04 a kg) for March and at 93.00 cents for April. No deals were heard on Wednesday.
The most active Tokyo Commodity Exchange rubber contract for July delivery hit a high of 289.1 yen ($2.38) a kg before ending at 285.6 yen, still 3.5 yen higher than Tuesday's close.
Speculative buying led by Japanese and foreign investment funds continued amid concern over tight supply as Thailand, the world's largest natural rubber producer, enters the wintering period, when output falls. "The earlier-than-usual start of wintering in some parts of Thailand has stoked bullish views on prices," said a Tokyo-based brokerage analyst.
"Fundamentals appear to stay solid, supporting sentiment. The only concern for now is crude oil, whose renewed volatility could hit the rubber market," he said.
On Monday, the July contract climbed as far as 290.6 yen, the best level for any benchmark since mid-July last year. The lead month had surged more than 20 percent from this year's low of 235.8 yen reached on January 9.
US crude oil jumped 5.5 percent on Tuesday, the biggest one-day gain in 16 months, as investors focused on a planned supply cut by Opec producers from Thursday. US crude oil futures for March delivery traded around $56.60 a barrel in Asia, off Tuesday's highs, ahead of US inventory data.
Higher crude oil is seen as a plus for natural rubber because it curbs the production of synthetic rubber, an oil-based product. "I would say the weather has improved but supplies are basically falling because some growing areas have entered the wintering season," said a dealer in Thailand's southern city of Hat Yai.
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