Tokyo futures higher, demand concerns weigh

TOKYO: Key TOCOM rubber futures ended slightly higher on Tuesday, after the Shanghai market hit its upper limit, though Europe's economic woes and Thailand's floods are clouding the outlook for demand.

The key Tokyo Commodity Exchange rubber contract for March delivery settled up 0.9 percent, or 2.7 yen, at 297.8 yen per kg after briefly touching the day's high of 301.5 yen. The new April contract will debut on Wednesday.

The October rubber futures contract expired on Tuesday at 291.3 yen, with delivery totaling 324 lots, or 1,620 tonnes.

Shanghai rubber futures extended gains, with the most active January contract rising by its daily limit to 27,050 yuan a tonne. The contract closed up 1.2 percent at 26,650 yuan per tonne, with volume picking up to 1.65 million lots.

"Investors are conscious of the 300 yen mark, but it will take time before the market stabilises above that level as floods in Thailand and economic woes could dampen demand," said Naoki Asami, chief broker at trading house Kanetsu.

Brent crude was steady above $111 on Tuesday as looming concern over Europe's economic health kept prices in check, while US oil rose for a third straight day, boosted by improved company earnings.

The floods in Thailand, the world's biggest rubber producer, have forced the closure of seven industrial estates, causing an estimated $3.2 billion in damage, disrupting supply chains and putting about 650,000 people temporarily out of work.

Toyota Motor Corp said on Monday it would trim production at its Japanese vehicle assembly factories this week, from Oct. 24-28, due to a shortage of Thai-made parts as floods in that country disrupted supply.

The impact on rubber supply from the floods is so far limited as many rubber factories, plantations and trading houses are located in the south, which was not affected by the deluge, traders said.

Copyright Reuters, 2011