Japan rubber futures extend losses, high spot prices squeeze margins

Japanese rubber futures extended losses on Friday, as multi-year-high physical prices squeezed margins, resulting in a lack of spot transactions and prompting traders to be cautious about procurement.

The Osaka Exchange (OSE) rubber contract for October delivery  was down 5.7 yen, or 1.36%, at 413.2 yen ($2.61) per kg.

The contract has lost 0.1% this week.

The rubber contract on the Shanghai Futures Exchange (SHFE) for September delivery slumped 480 yuan, or 2.66%, to 17,585 yuan ($2,584.32) per metric ton.

The most active June butadiene rubber contract on the SHFE fell 205 yuan, or 1.3%, to 15,555 yuan per metric ton.

Rubber prices across the Osaka, Shanghai, and Singapore contracts have fallen to weekly lows after suddenly surging on Wednesday.

The sharp rise in raw material prices has led to a surge in production and processing costs for Thai manufacturers, resulting in a lack of theoretical processing profits and a prolonged period of losses, Chinese broker Zhuochuang Information said in a report.

Still, high oil and physical prices continue to support rubber prices.

Oil prices gained more than 1% after President Donald Trump said he would not be much more patient with Iran and as concerns persisted over ship attacks and seizures despite Tehran saying about 30 vessels had passed through the Strait of Hormuz.

The prices of Thailand’s benchmark export-grade smoked rubber sheet (RSS3) and block rubber were up by 0.01% and 2.26%, respectively.

Though Thailand’s rubber crops typically enter a peak harvest season in May that lasts until September, high temperatures and insufficient rainfall earlier in the year have led to slower latex production, keeping supply tight.

The front-month rubber contract on Singapore Exchange’s SICOM platform for June delivery last traded at 220.1 U.S. cents per kg, down 1% as of 0700 GMT.