Tokyo rubber futures are expected to remain firm to the end of this year on Chinese buying, concerns about falling supply and a bullish technical trend, but dip a little in January, a Reuters poll showed on Friday.
The benchmark rubber contract on the Tokyo Commodities Exchange, currently June 2008, was forecast to rise 9.5 percent to 300 yen by the end of December from 273.9 yen at the end of November, according to the median forecast of 10 analysts and dealers polled by Reuters.
Improving technical sentiment, backed by firm oil prices, has lifted Tocom prices around 16 percent from a month low 261.6 yen on December 4, dealers said. "The Tocom market is technically driven," said Hisaaki Tasaka of Ace Koeki Co Ltd. "In this situation, the distant contract could test above 300 yen by the end of this year based on its bullish technical trend." Strong demand, especially from giant buyer China, was expected to help boost Tocom prices by the end of this year, according to the poll.
"I expect a round of purchases from Chinese tyremakers at the year end," said Lin Hui of Orient Securities. "The Chinese tyre industry has maintained double digit growth in the past two years. We expect demand next year to remain robust," she said. China rubber consumption should rise 12 percent in 2007 from 2.1 million tonnes last year, according to the China Rubber Industry Association.
It imported 1.6 million tonnes of natural rubber in 2006. However, the Tocom benchmark contract was expected to drop slightly by the end of January as most dealers expected a technical correction after a rally in December, while more supply could put pressure on prices.
Tocom rubber was forecast to slip to 293.8 yen per kg by the end of January, according to the poll. A survey of six dealers showed physical rubber prices were expected to rise further by the end of December due to limited supply as monsoon rains and floods hit Thailand's south and Malaysia, the world's biggest and third biggest producers.
Indonesia, the second biggest producer, is also in the rainy season, when tapping is disrupted. Thai RSS3 could rise to $2.55 per kg by the end of December, from $2.47 at the end of November.
Malaysian SMR20 may rise to $2.48 per kg from $2.38 and Indonesia SIR20 could rise to $2.43 by the end of December from $2.33 at the end of November. "Supply from Thailand and Malaysia could be volatile and should be a main concern," one analyst said.