Tokyo rubber futures rallied on Thursday, with the most active contract surging to a 22-year high as gains in other commodities, tight supplies in major producing countries and a weaker yen triggered heavy fund buying.
Gains in Japan elevated the price of tyre grade in Southeast Asia, where sentiment was bullish due to steady demand from main consumer China. Dealers also reported deals for Indonesia's SIR20 grade for August shipment.
The most-distant October Tokyo Commodity Exchange rubber futures contract hit a session high of 280.7 yen per kg ($2.53), the highest for a benchmark contract since February 1984, before ending at 275.9 yen, up 0.2 yen from Wednesday's close.
A weaker yen against the dollar also prompted buying in Japanese futures, which set the tone for global rubber prices. "It's a crazy market. I guess it's very much influenced by other commodities. Oil and base metals are all up," said a dealer in Thailand's southern city of Hat Yai.
Copper surged to a historic high and gold spiked to its highest in 25 years as investors piled their bets on commodities, which have offered higher returns this year than stocks, bonds or currencies.
"Activity was sluggish in the last few months, but trading is picking up as people are becoming more concerned about the supply conditions," said Shoji Sugata, assistant manager at Mitsubishi Corp Futures and Securities Ltd.
"Rising prices in the producing countries were increasing market concerns, which is resulting in pushing up TOCOM prices and increasing volume," Sugata said. Dealers said increasing concerns over tight supply conditions during the wintering season and news of unabated violence in the world's main producer, Thailand, this week induced fresh fund flow into Tokyo rubber futures. A bomb hidden in a motorcycle exploded in a busy market in Thailand's restive Muslim south on Wednesday, killing two Buddhist women and a soldier and wounding 13 shoppers.
In the physical sector, China was in the market to replenish stocks, buying rubber mainly from Indonesia. Dealers also noted buying interest from major tyre makers Michelin and Bridgestone Corp for the Indonesian grade.
August SIR20 was traded at 95.00 US cents per pound ($2.09) free on board (FOB) at Singapore. Bids for July were heard at 95.00 cents FOB Plumbing, Belawan and Surabaya but dealers wanted to sell at 96.00 cents.