Shanghai rubber higher

Shanghai rubber futures rose 3 percent over the past week and analysts expect a further rise after the New Year's Day holiday, when Chinese tyre manufacturers are expected to build up stocks. The most active rubber futures contract on the Shanghai Futures Exchange for March delivery rose 605 yuan on the week, to end at 23,445 yuan ($3,196) per tonne on Wednesday.
Traders and analysts expect a rapid rise in demand in January, when Chinese tyre manufacturers start building rubber stocks so they can keep production going during the week-long Chinese New Year holiday that starts on February 6.
Chinese buyers are looking for January and February cargoes in the international market, but have only bought small lots due to high prices, traders said. "Stock levels are low at the factories," said an official at a large state-owned tyre company, adding that prolonged rains in Thailand had disrupted tapping and caused a squeeze in physical supplies.
"Tyre companies will have to buy in January, even though prices will rise further due to the poor physical supply," he said. In the last few trading days of the year, volumes are expected to remain low, as traders are unwilling to trade actively before the New Year's Day holiday.
The market will be closed on December 31 and January 1. "The rubber futures will continue to trade between 22,000 and 24,000 (yuan) in the near term," said Lin Hui, an analyst with the futures trading unit of Orient Securities. Although analysts are bullish about the market, some said it would still be subject to influences from other markets, such as crude oil and the yen.
High crude oil prices encourage users to shift from synthetic rubber, a petroleum product, to natural rubber. "Most likely, crude oil will continue to be firm," said Zhou Zhiqiang, an analyst with Henan Wanda Futures Brokerage. The newly listed benchmark rubber futures contract for June delivery on the Tokyo Commodity Exchange has risen 3 percent since its debut on December 21, to 310.9 yen per kg on Wednesday, a seven-week high.
The previous benchmark contract for May delivery also rose 3 percent on the week, to 307.4 yen as of Wednesday afternoon. Tightening physical supplies and firm crude oil prices would support a rise in Tokyo rubber towards this year's high of 312.2 yen, hit on November 7, analysts said. The front month US crude oil contract on the New York Mercantile Exchange gained 4 percent on the week, to trade at $94.17 a barrel on Wednesday.