Tokyo Futures Rise On Supply Concerns, Near Record

Tokyo Futures Rise On Supply Concerns, Near Record
Posted: 08 Feb 2011 12:14 AM PST
Key Tokyo rubber futures rose on Tuesday (February 8) as supply concerns remained, staying within sight of a record high hit late last week.
The benchmark rubber contract on the Tokyo Commodity Exchange for July delivery rose 8.2 yen or 1.7 percent to 499 yen per kg as of 0010 GMT. The contract hit a record high 504 yen on Friday (February 4).
Tokyo rubber futures fell 2.4 percent on Monday (February 7) on weaker oil prices and profit-taking as players liquidated contracts after prices failed to stay firmly above major resistance of 500 yen, but tight supply still lent support, dealers said.
The Shanghai rubber futures market is closed and will reopen on Wednesday (February 9) after a week-long holiday.
Benchmark Thai RSS3 was still being offered at the record high of $6.10 per kg on Monday (February 7) despite a fall in Tokyo futures, reflecting strong demand amid tight supply.
Oil prices steadied on Tuesday (February 8) after falling sharply the day before when concerns about Egypt's political turmoil affecting oil flows in the region eased and investors' focus returned to rising U.S. inventories and a tepid employment picture.
The euro held steady on Tuesday (February 8), having recovered from a fall caused by weak German industrial data the day before.
(Reuters, February 8, 2011)






Rubber climbs on Chinese demand cues
Posted: 08 Feb 2011 12:13 AM PST
TOKYO (Commodity Online) : Speculative behavior of markets has propped up rubber prices driven by a demand surge subsequent to a drop in prices.
The speculators bought the commodity in abundance on belief that China would increase purchases after the Lunar Holiday ends on Wednesday.
The July contract rubber climbed 2.1% to $6,090 a metric ton (501.3 yen a kilogram) on the Tokyo Commodity Exchange and was seen trading at 499.3 yen as of 11:57 a.m.
The consumption of natural rubber in China is expected to rise to 3.6 million tons this year, a surge of 9%, reported Businessweek. China will kick start trade on Wednesday after a week of holiday.
Meanwhile, India consumption of rubber will gain 5.2 % to 991,000 tons, it is expected.
Generally, rubber users tend to increase stockpiles before the low production period which is currently in the offing in major producing states.
The February-May slump in production is attributed to wintering, when rubber trees shed leaves and latex output comes down. Thailand is undergoing this phase and this has significantly reduced market inflow of rubber.
Besides, La Nina has led to torrential rains in parts of Southeast Asia reducing supplies from Thailand, Indonesia and Malaysia; countries that constitute 70 percent of global natural rubber supply.
Meanwhile, India’s natural rubber output has surged 2.8% during the ten months ending January even as production stood at 749,950 metric tons between April and January, compared with 729,250 tons Y-O Y.
Output for January was at 98,800 tons compared to 97,500 tons a year earlier.

(Source: http://www.commodityonline.com/news/Rubber-climbs-on-Chinese-demand-cues-36308-3-1.html)






Tokyo futures rise further, but weaker oil weighs
Posted: 08 Feb 2011 12:12 AM PST
BANGKOK, Feb 8 - Tokyo rubber futures rose further on Tuesday on the back of concerns on falling supply, but weaker oil prices still weighed on prices, dealers said.

* The benchmark rubber contract on the Tokyo Commodity Exchange <0#JRU:> for July delivery rose 8.1 yen, or 1.6 percent, to settle at 498.9 yen per kg.

* Oil prices edged down on Tuesday as transit through the Suez Canal remained unaffected by the political turmoil in Egypt, while expectations of a build-up in U.S. crude inventories also weighed.

* "Players liquidated contracts again after seeing oil prices retreat, preventing rubber futures from breaking another new record," one dealer said.

* The Shanghai rubber futures market is closed and will reopen on Wednesday after a week-long holiday.

* TOCOM rubber futures prices were expected to rise further on Wednesday, as fears on falling supply was likely to provide supports, dealers said. (Reporting by Apornrath Phoonphongphiphat; Editing by Jason Szep)




Japan Rubber Stocks Up 3 Pct To Jan 31 Vs Jan 20
Posted: 08 Feb 2011 12:09 AM PST
Japan's crude rubber inventories rose nearly 3 percent by Jan. 31 from Jan. 20, Rubber Trade Association of Japan data showed on Tuesday (February 8).
Crude rubber stocks totalled 8,122 tonnes as of Jan. 31, up 219 tonnes or 2.8 percent from 7,903 tonnes as of Jan. 20. Inventories rose on Jan. 10 for the first time in two months.
The latest level was also up 11 percent from a year earlier, when crude rubber stocks stood at 7,288 tonnes.
Crude rubber stocks fell late last year, raising concerns over supply shortages as bad weather in rubber producing countries disrupted output.
They marked a record low of 2,628 tonnes on July 20, 2010.
Rubber inventories hit a 2010 peak of 8,222 tonnes on Feb. 28, the highest since July 20, 2009.




Rubber Climbs to Near Record as China May Increase Purchases
Posted: 07 Feb 2011 07:25 PM PST
Rubber increased as a price decline yesterday spurred investors to buy amid speculation China, the world’s largest user, may step up purchases after the New Year holiday to replenish stockpiles.

The July-delivery contract gained as much as 2.1 percent to 501.3 yen a kilogram ($6,090 a metric ton) before trading at 499.3 yen on the Tokyo Commodity Exchange as of 11:57 a.m. The most-active contract had the biggest one-day drop since Jan. 26 yesterday, retreating from a record 504 yen reached Feb. 4.

China will resume trade tomorrow after the weeklong holiday. Natural-rubber inventories monitored by the Shanghai Futures Exchange stood at 58,673 tons, 61 percent below last year’s peak of 151,832 tons, the bourse said Feb. 1.

“Rubber is buoyed by expectations that Chinese buying may gather pace,” Kazunori Kokubo, general manager at Tokyo-based broker Yutaka Shoji Co., said today by phone. “The approach of wintering is another support to the market.”

Farmers reduce tapping during the so-called wintering period from February to May, when rubber trees shed leaves and latex production declines. Some plantation areas in northeastThailand have already entered the low-output season, according to the Rubber Research Institute of Thailand.

Rubber users tend to increase stockpiles of raw material before the low-production period begins in major growing areas. Thai rubber production usually shrinks as much as 60 percent from peak levels, according to the Association of Natural Rubber Producing Countries.

La Nina

Rubber futures have gained 20 percent this year, extending last year’s 50 percent rally, as rising car sales led by China and India improved demand for tires. Supplies from Thailand, Indonesiaand Malaysia, the top growers representing 70 percent of global supply, were curbed as a La Nina has led to higher- than-average rains in parts of Southeast Asia. The weather event started in June and usually lasts for nine months or more.

The Thai physical price remained at a record 184.05 baht ($5.97) per kilogram yesterday, supported by car sales and supply concerns, the Rubber Research Institute of Thailand said.

The Shanghai market is closed for the Lunar New Year holiday. May-delivery rubber in Shanghai climbed to a record 41,850 yuan ($6,350) a ton on Jan. 31.

Natural-rubber consumption in China may rise 9 percent to 3.6 million tons this year, while rubber use in India may gain 5.2 percent to 991,000 tons, according to the Association of Natural Rubber Producing Countries.

Natural-rubber output in India, the fourth-biggest producer, gained 2.8 percent in the 10 months through January as favorable weather and record prices boosted production, the state-run Rubber Board said yesterday.

Production totaled 749,950 metric tons in the April-January period, compared with 729,250 tons a year earlier, the board said in an e-mailed statement. Output was 98,800 tons last month, little changed from 97,500 tons a year earlier, it said.

(Source: http://www.bloomberg.com/news/2011-02-08/rubber-climbs-to-near-record-on-speculation-china-may-increase-purchases.html)




Rubber output rises on record prices, weather
Posted: 07 Feb 2011 02:37 PM PST
Natural-rubber output in India, the fourth-biggest producer, gained 2.8% in the 10 months through January as favourable weather and record prices boosted production, the state-run Rubber Board said.

Production totaled 749,950 tonne in the April-January period, compared with 7,29,250 tonne a year earlier, the board said in an e-mailed statement on Monday. Output was 98,800 tonne last month, little changed from 97,500 tonne a year earlier, it said.

Rubber prices in India climbed to a record this year as supplies from Thailand, Indonesia and Malaysia, the top growers representing 70% of global supply, were curbed by rain, while rising car sales boosted demand for tyres. Futures have gained 18% on the Tokyo Commodity Exchange to a record this year, extending last year’s 50% rally.

“Overall, the bullish price structure continues, and it will be a while before prices ease substantially,” Anand James, chief analyst at brokerage Geojit Comtrade, said in an interview. “Sellers were inclined to hold back their stocks in anticipation of lean-season demand, with Thailand, India and Indonesia entering wintering period,” he said.

Prices in India may reach Rs 270 a kg between March and May as demand from tyre makers remains firm, he said. Immediate-delivery rubber prices gained 0.4% to Rs 23,800 per 100 kg on Monday, according to data from the Multi Commodity Exchange of India.

(Source: http://www.financialexpress.com/news/rubber-output-rises-on-record-prices-weather/747246/0)




The Price Crisis Part III: Futures for Price Discovery
Posted: 07 Feb 2011 02:26 PM PST
Indian tire manufacturers are still wary of the futures market in rubber and their skepticism has become stronger with rising prices and high duties on imports. But Anil Mishra, CEO of Ahmadabad-based National Multi-Commodity Exchange of India Ltd., the pioneer in electronic commodity trade, says many tiremakers are realizing futures' advantages

The Ahmadabad-based commodity bourse, National Multi-Commodity Exchange of India Ltd, has come out in the open refuting allegations by Automotive Tyre Manufacturers Association (ATMA) that NMCE is manipulating rubber futures prices. NMCE CEO Anil Mishra said ATMA allegations are incorrect and baseless pointing out that the price movements in the natural rubber futures is not because of manipulation but on account of supply-demand mismatch.
Rubber prices have hit an all-time high and there is no sign they are going to come down, at least in the coming few years. Prices climbed to a record as rain cut production in Southeast Asia, worsening a shortage as demand continually expands in China and India.
“The tightness of supply and burgeoning demand from India and China would keep rubber price trend higher but it would be moving up and down within a range,” Mishra told Polymers & Tyre Asia.
“This price movement within a rising band would be more in the futures market than in spot market because in futures market, besides physical commercial players, there are non-commercial players also who do not hold on to one price view and keep responding to the daily and weekly news whereas in spot market there are mostly commercial players who hold on to one price view for quite some time and are slow in responding to the news,” he said.
This rise and fall gives opportunity to various commercial players to hedge on the exchange, he explained.
It is expected that tiremakers may rush to buy rubber while it is available as output will drop in view of wintering, which is the low-production season from February to April. With rains lashing Thailand, the world’s top rubber producer, there is no signal that prices are likely to fall.
It is in this context that Mishra is keen to address the concerns of tiremakers who fear that futures trading contribute to speculation leading to market volatility.
“Many tire manufacturers have started partially participating but since in futures market price goes both up and down they think it is more speculative,” he said.
Non-commercial players work on thin margin and respond very quickly to the information, which has bearing on the price but commercial players do not respond so quickly.
Remove Restrictions
“Many tire players have informed us that they are not allowed to sell on the exchange and they can only buy. This restriction limits their operation and should be removed,” the Mishra said.
“When they are hedging their future need, they should not be required to take delivery only from the exchange,” he felt. “Exchange should be used more for price risk management. They should be allowed to sell their futures position when they buy from their preferred suppliers in the physical market.”
This enabling provision is must to allow large-scale hedging by the tire manufacturers and then they could fully experience positive benefits of futures market, Mishra said. “The analysis of our data shows that more than 80% of time the daily price volatility has been within 2%.”
In a five-year time frame, Mishra thinks there would be good growth on all fronts in India’s rubber market. This will be due to improved price.
“There would be investment in agri inputs in rubber plantations resulting in increase in productivity and production, better upkeep of plantations, old trees would be replaced by young trees and more investment is likely to come from investors in the plantation sector,” he forecast.
Synthetic rubber production is also increasing, which is a natural process of substitutes in economic values that will keep on striking a right balance between increase in demand, capacities and production.
“We would like to point out the threat of escalating land prices as reality is booming is also a factor that has to be kept in mind and increased labor cost will all have impact,” the NMCE CEO said.
There would be increased participation in futures market for price discovery and price risk management. In India more cooperatives and banks would start playing the role of aggregators and more innovations would come with amendment in Forward Contracts (Regulation) Act.
Options would be introduced which would help the commercial players, both producers and user industry, immensely in having guaranteed assured price when the market moves against them and also have additional benefit if the market moves in their favor, Mishra pointed.
Stock Position
Commenting on ATMA’s statement doubting rubber stock figures given out officially by government agencies, which are in variance with the ground situation, he said NMCE is not as equipped as Rubber Board to give better crop forecast. “Hence it would not be proper on our part to make such sweeping comments,” Mishra said. But since the demand is not being fully met, tightness in availability is being observed.
“Hence there is a general feeling that stocks may not be as high as is being reported otherwise it should have come out at these high prices.”
It is important to note that Rubber Board gets monthly return of production, sales, purchase, consumption and stocks figures every month from licensed plantations, dealers, manufactures for regulation and collection of cess from consumers.
“As per Rubber Board’s response these high stocks figures are as reported by producers themselves, which could be obvious.”
The function of NMCE is to provide transparent market for price discovery and price risk management by bringing all types of market participants with varied interests from all over India on a single platform whose interplay could together give the fair view of rubber price. One group doesn’t influence the price.
Farmers, cooperatives, traders, investors, industry users, day traders, speculators, arbitrageurs all participate and they never have uniform views and that’s how this market remains liquid and vibrant, Mishra said.
The best buyer gets to buy and the best seller gets to sell which is decided electronically without human intervention based on bids and offers.
Stakeholder Interest
NMCE is continuously interacting with all the stakeholders and arranging training programs for them along with FMC, the commodity markets regulator, as well as independently to remove the myths and explain how best they could utilize the futures market.
“Our members are also educating their clients. NMCE is keen in promoting RSS 5 futures for over 5000 Indian small and medium enterprises now as they are most vulnerable to the price volatility and have been misled by vested interests,” Mishra explained.
NMCE is also promoting sellers and buyers warehouse delivery to further smooth the process and bring cost-efficiency.
On comments by some tire producers that they cannot afford dedicated staff for futures trading and get into market operations, Mishra is of the view that such staff would be required only if one takes position and speculates in the market.
“If one is hedging, it is like buying ones requirement from other alternative market; instead of buying in the physical market, the tire company can buy on the futures market, where they can buy forward without any risk of default and can swap one’s futures position with physical from their preferred supplier,” Mishra pointed out.
The purchase manager who buys physical could buy futures depending on whichever is cheaper and thus no dedicated staff is required. If tiremakers get global traders who could give them assured forward price with no default, their strategy could be different. “In India we don’t have such strong deep pocket traders, who could guarantee future price and delivery.”
Market Experience
Indian tire manufacturers could perhaps learn from the experience of rubber futures market in other Asian countries, as that would certainly be the way market would function in a well-regulated situation like in India.
“Rubber futures market is very active in Shanghai and Tokyo where the volume is very large because speculative participation is very large,” Mishra said.
The crude price and yen to dollar strength also has great bearing in TOCOM. Shanghai market has its own fundamental factors of high demand and the availability for imports, duty structure etc coupled with high speculative participation.
“Indian market is more regulated in terms of open interest, daily price limit; currently only four months forward is active,” he said.
ATMA had taken up the issue of futures with regulator FMC about price manipulation in NR trade at the NMCE platform and sought either temporary ban on futures trade in rubber or cut in daily price band. After FMC, it observed that ATMA’s allegation was wrong and without any evidence.
Mishra commented: “The daily price band for natural rubber has been kept lowest at 4% in India as compared to 5% in Shanghai and 10% in Singapore. If we reduce from 4% to 1%-2%, then trade can hardly take place on the exchange.”
At present, a large number of farmers are participating in the rubber futures trade through cooperatives, he said adding that on an average, 7,000 tons of rubber is traded daily on the exchange platform.
Obviously the high prices are due to demand-supply mismatch. (Courtesy of Polymers & Tyre Asia)



Spot rubber remains steady


KOTTAYAM, FEB. 8:
Spot rubber finished almost unchanged on Tuesday. The market lost its direction as the domestic futures declined recording moderate losses in all its contracts on the NMCE. Gains in global rubber rates failed to enhance the sentiments but the prices managed to sustain at current levels lacking quantity sellers on any grade.

Sheet rubber closed flat at Rs 237 a kg both at Kottayam and Kochi according to traders and Rubber Board. Meanwhile RSS 5 lost marginally on comparatively low demand. The overall volumes were dull.

FUTURES DECLINE

The February series declined to Rs 232.50 (236.77), March to Rs 237 (241.91), April to Rs 246.00 (250.57) and May to Rs 249 (254) a kg for RSS 4 on the National Multi Commodity Exchange (NMCE).

The volumes totalled 15070 lots and open interest 13358 lots. The turnover was Rs 364.94 crores.

RSS 3 (spot) closed firm at Rs 275.61 (272.82) a kg at Bangkok. The February futures for RSS 3 improved to ¥503 (Rs 277.49) from ¥498.7 during the day session and then to ¥506 (Rs 279.15) a kg in the night session on the Tokyo Commodity Exchange (TOCOM).

Spot rates were (Rs/kg): RSS-4: 237 (237); RSS-5: 226 (227); ungraded: 221 (221); ISNR 20: 231 (231) and latex 60 per cent: 152 (152).