Japanese rubber futures down on weak Chinese demand

BEIJING: Japanese rubber futures fell on Monday, weighed down by weak Chinese demand amid anticipation of rising global supply.

The Osaka Exchange (OSE) rubber contract for April delivery last traded down 0.7 yen or 0.27%, at 257.9 yen per kg. The rubber contract on the Shanghai Futures Exchange (SHFE) for January delivery was down 95 yuan or 0.67%, at 14,165 yuan per metric ton.

Demand, especially in the largest consuming country China, remains weak and the physical market situation indicates the possibility of a bearish outlook in the short-term, said Jom Jacob, co-founder of India-based analysis firm What Next Rubber.

China’s factory activity unexpectedly contracted in October, two surveys showed, renewing concerns over the state of the country’s sprawling manufacturing sector and its fragile economic recovery at the start of the fourth quarter.

Supply is expected to improve in the short-term due to the seasonal peak production season globally and the weakening rainy weather in top producer Thailand, Jacob said. Rubber inventories in warehouses monitored by the SHFE fell 1.1% from last Friday, the exchange said on Friday.

BOJ Governor Kazuo Ueda said the likelihood of the country achieving the central bank’s 2% inflation target was gradually increasing but not enough to end ultra-loose monetary policy. Japan’s benchmark Nikkei average rose 2.37% to 32,708.48.

Oil prices edged up as top exporters Saudi Arabia and Russia said they would stick to extra voluntary oil output cuts until the end of the year, keeping supply tight, while investors watched out for tougher US sanctions on Iranian oil.

Natural rubber often takes direction from oil prices, as it competes for market share with synthetic rubber, which is made from crude oil. The front-month rubber contract on Singapore Exchange’s SICOM platform for December delivery last traded at 146.5 US cents per kg, down 0.5%.