NMCE Rubber drops on active selling

NMCE Rubber drops on active selling
THURSDAY, APRIL 7, 2011

NMCE rubber futures continued the bearish trend on active selling on Wednesday. However, losses were very limited due to positive cues from TOCOM futures. Interest rate hike by central bank of China also weighed on sentiments.
Thus, TOCOM futures market traded also reversed the trend on negative side but overall positive fundamental limited the losses and futures settled at ¥460.80 per Kg. Domestic spot market also witnessed correction thus, on cues from overall market NMCE platform continued the fall and ended in red.
The rubbers futures are projected to continue the corrections on profit selling in initial hours on Thursday. However, TOCOM September futures are trading higher at ¥458.50 per Kg. on follow through buying.
However, gains at TOCOM are expected to be limited due to Chinese interest rate hike will reduced the demand from China. Nonetheless, weakening yen might support the prices of this yen dominated commodity which may also lend some support to Indian rubber futures later in the day.
Factors to Watch For
Floods in Thailand, world’s largest exporter have impacted the supply of commodity used in tyres and rising crude oil prices are also supporting the rubber prices
According to Department of Disaster Prevention & Mitigation, around 19,641 acres of rubber plantations have been damaged in Thailand due to heavy flood
According to the Rubber Research Institute of Thailand, The physical price of Thai rubber surged 3% to 180 baht ($5.96) a kg on April 5 amid damage to plantations from floods
As per deputy head of the China Rubber Industry Association, Natural-rubber demand in China, the biggest consumer, will rise 8% this year. Consumption will be 3.24 million metric tons, while tire output will climb 7.9 percent to an all-time high of 453 million units
As per data released by rubber board, the year end deficit in natural rubber in India is estimated around 1.2 lakh tons and it is expected to be increase to 2 lakh tons during 2011-12
According to the Association of Natural Rubber Producing Countries, Consumption in China, India and Malaysia, representing 48% of global usage, will increase this year
DERIVATIVE ANALYSIS
Indian Futures (NMCE)
The NMCE April contract, prices, volumes are rising and open interest all are declining. If the total open interest is falling off and prices are declining, the price decline is being caused by disgruntled long position holders being forced to liquidate their positions.
Technicians view this scenario as a strong position technically because the downtrend will end as all the sellers have sold their positions, creating fresh buying opportunity at lower levels.
Japan Futures (TOCOM)
The TOCOM active August contract, prices are rising while volumes and open interest are falling.
Market is running out of traders willing to open or hold an open long/buy. Traders are liquidating both loosing short positions & closing winning long positions. A higher probability the market is set to retrace in price lower at some point forward.
Shanghai Futures (SHFE)
The SHFE active July contract, prices, volumes are rising while open interest is falling. Market has a lot of traders initiating from both sides but larger traders may be liquidating into the higher prices.
The market may be vulnerable to large price swings as shorter time frame traders attempt to trade from both sides of the market but liquidating before end of- day. Often signals of a market turn near-term or continued volatility.




Rubber Futures in Tokyo Near One-Month High as Thai Floods May Cut Supply
THURSDAY, APRIL 7, 2011


Rubber climbed to near a one-month high as a weakening Japanese yen improved the appeal of the commodity used in tires and gloves, amid concern flooding in Thailand, the world’s largest producer, may lower supply.
The September-delivery contract gained as much as 1.5 percent to 464.8 yen a kilogram ($5,444 a metric ton) on the Tokyo Commodity Exchange before trading at 460 yen at 10:44 a.m. local time. The most-active contract touched 466.8 yen on April 5, the highest level since March 7.
“The main factor today is the weakening yen,” Roka Komiya, a rubber trader at Marubeni Corp., said by phone from Singapore. Demand for nearby contracts from Japanese and U.S. manufacturers rose after Thailand’s southern provinces were inundated, he said.
The yen tumbled against all of its major counterparts tracked by Bloomberg on speculation theBank of Japan will expand economic stimulus as the nation recovers from its worst earthquake on record, and on speculation the European Central Bank will increase borrowing costs.
The yen weakened to as low as 85.50 a dollar, compared with 85.27 at the close of stock tradingin Tokyo yesterday.
Thai supply falls seasonally as farmers reduce tree-tapping during the so-called wintering season from February to May.
Rainfall may continue to spread across southern provinces this week, the Thai Meteorological Department said on its website today. Fourteen provinces in the south represent about 80 percent of the country’s rubber output.
Flooding in 10 southern Thai provinces has killed 51 people and affected 2 million, the Department of Disaster Prevention & Mitigation said in a statement on its website. About 50,000 rai (19,641 acres) of rubber plantations have been damaged. Flooding has eased and the government is rebuilding infrastructure in three flooded provinces, it said.
The physical price of Thai rubber surged 3 percent to 180 baht ($5.96) a kilogram on April 5 amid damage to plantations from floods, lowering production, according to the Rubber Research Institute of Thailand.
Rubber for September delivery gained for a second day, rising as much as 0.9 percent to 36,245 yuan ($5,539) a ton on the Shanghai Futures Exchange.




Tokyo Futures Inch Up On Weak Yen And Strong Oil Prices
THURSDAY, APRIL 7, 2011

Key Tokyo rubber futures inched higher on Thursday (Apr 7), drawing support from a weaker yen and strong oil prices, but the rapid pace of price increases early this week made investors cautious, capping the upside.
FUNDAMENTALS
The key Tokyo Commodity Exchange rubber contract for September delivery rose 1.2 percent, or 5.4 yen, to 463.3 yen as of 0029 GMT, up from Wednesday's (Apr 6) settlement price of 457.9 yen.
The Shanghai rubber market resumed trading after a two-day holiday. The most active Shanghai rubber contract for September delivery rose 1,305 yuan to close at 35,940 yuan ($5,494) per tonne on Wednesday (Apr 6). Volume stood at 597,070 lots.
Brent crude oil prices rose to a 2-1/2-year high above $123 a barrel on Wednesday (Apr 6) before erasing the majority of gains in volatile trade as market players fretted the recent rally was overdone.
The yen slid to an 11-month low against the euro and a six-month low against the dollar. More losses were expected for the yen as investors such as macro hedge funds add to bearish bets, with the Bank of Japan looking set to lag other central banks in tightening policy.
(Reuters, April 7, 2011)