SINGAPORE: Japanese rubber futures pared earlier gains after a four-session rally on Wednesday, as resilient supply and high inventory levels outweighed optimism in the automobile sector.
The Osaka Exchange (OSE) rubber contract for December delivery was down 2.4 yen, or 0.72%, at 329.5 yen ($2.24) per kg. The rubber contract on the Shanghai Futures Exchange (SHFE) for September delivery fell 25 yuan, or 0.17%, to 15,005 yuan ($2,094.27) per metric ton. The most active August butadiene rubber contract on the SHFE lost 150 yuan, or 1.25%, to 11,875 yuan ($1,657.41) per ton. While domestic demand for rubber tyres has improved, tyre companies are sitting on large inventories, dampening their appetite for restocking, said Chinese rubber sales portal Natural Rubber Network.
Top rubber producer Thailand’s meteorological agency warned of heavy rains and accumulations that may cause flash floods and overflows from July 23-24.
However, the typhoons causing supply disruptions in key producing regions of Southeast Asia are likely to be short-lived, said Chinese financial information site Tonghuashun Information in a note. Elsewhere, President Donald Trump announced a trade deal between the US and Japan that will lower tariffs on Japanese automobile exports to 15% from a proposed 25%.
Automobile sales could influence the intensity of automobile manufacturing, which involves using rubber-made tyres. Japan’s Nikkei jumped 3.7% as shares of automakers surged.
Still, high prices for raw materials both domestically and internationally, alongside a rise in downstream tyre production, are providing strong support for the natural rubber market, Tonghuashun said in a separate note.
The front-month rubber contract on Singapore Exchange’s SICOM platform for August delivery last traded at 169.5 US cents per kg, down 1.1%.
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