Tokyo rubber futures may jump more than 3 percent by end-May on demand from China and tight supplies in Southeast Asia, but a failure to crack a resistance level continues to dog investors, a Reuters poll showed on Friday.
The benchmark rubber contract on the Tokyo Commodity Exchange, currently October 2007, could rise 3.6 percent by end-May to 287.3 yen ($2.37) per kg, from 277.2 yen at the end of April, according to the median forecast of 10 analysts and dealers polled by Reuters.
The forecasts ranged from 260 yen to 300 yen. Main consumer China is likely to buy more rubber due to its strong economic growth and also ahead of the 2008 Olympic Games in Beijing, where a 100 billion yuan ($13 billion) investment in public transport is expected to keep traffic flowing.
But a bearish technical outlook, due to Tokyo's failed attempts to break 300 yen in recent weeks, could limit gains, said the respondents, who expected the most active contract to reach a median of 286.3 yen per kg by the end of June.
The forecasts for June ranged from 280 to 310 yen. "As long as supply conditions are unclear, I don't think distant TOCOM rubber will fall below 250 yen," said Shoji Seagate of Mitsubishi Corp Futures and Securities Ltd said.
"Underlying technical look weak, particularly after failing to break through 300 yen," he said. The benchmark contract failed to breach 300 yen twice this year in mid-February and then in mid-April, when it rallied to a nine-month high of 299.5 yen.
But erratic weather in main producing countries Thailand, Indonesia and Malaysia could help cushion the falls in Tokyo futures and offered support for the physical market.
"Supply is still tight in May and it's not clear whether it could pick up in June," said a dealer in Thailannd's rubber centre of Hat Yai Supplies have been tight in recent weeks following heavy rains in Thailand and Malaysia, the world's first and third-largest producer respectively.
A combination of dry and wet weather in Indonesia, the world's second-largest producer, has also disrupted tapping and the flow of latex. Although supplies may improve eventually, they may not be enough to meet demand from China, which is expected to stock up in the second half of 2007 after smaller-than-expected purchases in the first half due to high prices.
China's imports of natural rubber in the first quarter of 2007 fell 1 percent to 500,000 tonnes from the same period a year. It was forecast to import 1.75 million tonnes this year, up from 1.61 million tonnes in 2006, according to the China Rubber Industry Association.
"Rain should stop and supply should peak in June, but now no one knows for sure whether more rain would come because the weather is unpredictable," said a dealer in Malaysia. A survey of six dealers and analysts expected Thai RSS3 to rise to a median $2.30 per kg by the end of May from $2.27 by the end of April.
Malaysia SMR20 was forecast to rise slightly to $2.24 per kg from $2.20, while Indonesian SIR20 could rise to a median of $2.13 per kg by the end of May from $2.11 by the end of April.
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