TOCOM hovers at nearly 2-year low amid trade spat fears

TOKYO: Benchmark Tokyo rubber futures shed early gains to end lower on Wednesday, hovering at a nearly 2-year low hit in the previous session, amid worries that escalating trade conflicts may hurt global economy and demand for rubber.

China and the United States plunged deeper into a trade war on Tuesday after Beijing added $60 billion of U.S. products to its import tariff list in retaliation for President Donald Trump's planned levies on $200 billion worth of Chinese goods.

The Tokyo Commodity Exchange (TOCOM) rubber contract for February delivery  finished 0.2 yen lower at 165.9 yen ($1.5) per kg, after hitting 167 yen earlier in the trade. It touched the lowest since Oct. 4, 2016 at 164.1 yen on Tuesday.

"Investors are concerned about negative impact from the global trade spat," said Toshitaka Tazawa, an analyst at commodities broker Fujitomi Co.

"Especially, there is a growing fear that rubber demand would drop if the United States adopts import tariffs on Japanese cars," he said.

Japan is hoping to avert steep tariffs on its car exports and fend off U.S. demands for a bilateral free trade agreement at a second round of trade talks with the United States, likely to take place later this month.

Japan's biggest automakers and components suppliers also worry they would be hit hard if Washington follows through on proposals to hike tariffs on autos and auto parts to 25 percent.

"If such tariffs are implemented, the TOCOM may fall below a key support level of 165 yen," Tazawa said.

The most-active rubber contract on the Shanghai futures exchange for January delivery rose 30 yuan to finish at 12,135 yuan ($1,771) per tonne.

The front-month rubber contract on Singapore's SICOM exchange for October delivery last traded at 132.3 U.S. cents per kg, down 0.6 cent.