Most buyers held back from the rubber market waiting for prices to fall on Friday as profit-taking hit Tokyo futures, but dealers said supply concerns might cushion further falls in prices.
"TOCOM rose a bit too much yesterday, but because of the fundamental factor of tighter supply in Thailand, I don't think it will break 200 yen," said one trader with a major trading firm in Singapore.
The benchmark May 2006 contract on the Tokyo Commodity Exchange (TOCOM) was quoted at 203.4 yen per kg on Friday. The previous benchmark April contract fell 1.0 yen a kg at 201.1 yen on Friday, while the spot November rubber contract expired on Thursday at 189.5 per kg, up 2.1 yen with 306 lots or 1,530 tonnes of deliveries.
"Demand is very strong but they're taking their time for prices to fall, particularly China. They're buying less than what they actually need because of expectations of lower import tax," he said.
The Chinese Rubber Industry Association had asked the government that import tariffs on natural rubber be slashed to 10 percent from the current 20 percent because of low domestic stocks and high global prices.
The decision could be made next year. China is the world's largest consumer of natural rubber. Heavy downpours flooded eight southern provinces in Thailand, the world's top producer and exporter, in the past weeks and hindered tapping and kept prices supported, traders said.
Unfavourable weather also hit Malaysia. "These flooded areas have affected tapping and production," said one Thai trader in the southern province of Phang Nag, but added that no rubber plantations were hit by the floods.
"RSS3 was traded overnight at $1.62 a kg, but today's offers will depend on how Tokyo is closing later today," said another Thai trader. Thailand's STR20 grade for December and January delivery was quoted lower at $1.60 a kg over $1.62 the previous day.
Malaysia's SMR20 was quoted at an average of $1.60 a kg. No bids were reported so far, traders said.
In Indonesia, flowing supplies have depressed raw material prices further to $1.42 a kg from $1.43 a day ago.
"A Singapore dealer bought SIR20 at $1.58 free on board Begawan overnight for several thousands tonnes," said one Indonesian trader in Sumatra adding that prices may fall up to half a cent if Tokyo closed lower.
Selling in Tokyo dragged down some rubber futures contracts in Shanghai, where the most active March opened 100 yuan a tonne lower from Thursday's close and climbed up to 17,375 yuan.