SHANGHAI: Japanese rubber futures drifted lower on Tuesday as traders gauged the impact of the Iran war on demand, while firm physical and oil prices lent support.
The Osaka Exchange rubber contract for August delivery was down 5.2 yen, or 1.37 percent, at 374.7 yen (USD2.35) per kg. The rubber contract on the Shanghai Futures Exchange (SHFE) for May delivery fell 35 yuan, or 0.21percent, to 16,970 yuan (USD2,463.92) per metric ton.
Most active April butadiene rubber contract on SHFE fell 255 yuan, or 1.62percent, to 15,530 yuan per metric ton. Rubber prices have been rangebound as different consumers and manufacturers weigh on the effect of the Iran war on demand and assess freight rates, said Farah Miller, CEO of Helixtap Technologies.
Spot trading has been muted, and rubber producers are hesitant to lower prices as supply is tight, Miller added. Prices of Thailand’s benchmark export-grade smoked rubber sheet (RSS3) and block rubber were up at 82.9 baht per kg and 70.42 baht per kg, respectively, on the back of seasonal wintering.
Oil rose more than 2percent on worries about supply, with the Strait of Hormuz mostly shut and US allies rebuffing calls to send warships to help tankers. Natural rubber often follows oil prices as it competes with synthetic rubber, which is made from crude oil. Several butadiene rubber factories have cut production or shut down for maintenance due to a lack of feedstock, as several Asian refiners have cut runs or declared force majeure.
As such, natural rubber prices are supported as factories substitute synthetic rubber supply with natural rubber, a Singapore-based trader said. The front-month rubber contract on Singapore Exchange’s SICOM platform for April delivery last traded at 195.1 US cents per kg, down 0.4percent as of 0730 GMT.
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