Japan's most active rubber futures contract fell more than 3 percent on Tuesday as speculators and investors booked profits, dragging down the price of tyre-grade in Southeast Asia.
Talk that supply was improving in main producer Thailand also put pressure on Tokyo futures, where key most distant December Tokyo Commodity Exchange rubber ended down by 10 yen at 301.2 yen ($2.63) a kg.
The contract hit a three-week high of 314 yen on Monday as gains in other commodities such as gold and oil triggered new buying. "I guess 295 and 300 will be the support levels and if it breaks 290 yen, we can expect the market to go down further," said a dealer in Tokyo.
"We need to watch the supply-and-demand situation in the next couple of days. Then, we will see whether or not this is a correction," he said. Thailand's benchmark RSS3 rubber sheet for August shipment fell to as low as $2.73 a kg, from Monday's $2.80 a kg free on board (FOB).
Tyre-grade Standard Thai Rubber or STR20 block, for August shipment was unchanged at $2.55 a kg.
Indonesia's September SIR20 dropped to 109 US cents per pound ($2.40) a kg free on board at plumbing port in South Sumatra, from 110 US cents on Monday.
But some dealers said tight supply during the wintering season in parts of Sumatra helped cushion the falls. Wintering occurs in the warmest month of the year, when rubber trees shed their leaves and latex output slows.
In South Sumatra, wintering normally runs from July to September. "The market is deserted. Nothing is traded but raw material is getting harder to find. SIR20 has been offered at 109 cents but buyers want lower prices," said a dealer in Padding, the provincial capital of West Sumatra.
The most-active September Shanghai rubber contract fell 1,045 yuan per tonne to end at 25,595 yuan ($3,201) per tonne, tracking loses in Japan.
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