Key Tokyo rubber futures fell on Tuesday on profit-taking, after a five-day rally on expectations of buying from China in the physical market as well as plans to curb exports by the top three rubber producers. The key Tokyo Commodity Exchange rubber contract for July delivery ended the morning session down 1.2 yen per kg at 143.3 yen.
The contract on Monday rose as high as 146.0 yen, the highest level for any benchmark since January 29. But the downside was limited partly by arbitrage buying from Chinese participants, traders said. A faster pace of gains in Shanghai rubber futures than in TOCOM futures recently has narrowed the gap between the two markets, making the Shanghai market look relatively overbought, a manager at a Tokyo-based trading firm said.
"TOCOM's downside is supported as there are expectations that people will buy TOCOM and sell Shanghai for arbitrage," the manager said. "But physical demand is seen withering at prices above the current levels," he said.
The benchmark May Shanghai contract stood at 13,820 yuan per tonne, up 10 percent from the level on February 2, when trading resumed after the Lunar New Year holiday. Oil prices were little changed below $40 a barrel, pausing after an overnight decline, as investors adopted a wait-and-see ahead of a US economic stimulus package expected to be approved this week.
In the physical market, Chinese buyers continued to show interest in nearby cargoes for Indonesia's SIR20 grade, currently the most competitive in prices in the major producing region, traders said. China, the world's biggest rubber consumer, was short of material after many buyers defaulted on shipments late last year as cash prices tumbled from a 56-year high above $3 a kg hit in July.