Japanese rubber futures hit 15-year high on tight supply, weaker yen

SHANGHAI: Japanese rubber futures extended gains on Wednesday to reach their highest since April 2011, supported by tight supply, a weaker yen and higher oil prices.

The Osaka Exchange (OSE) rubber contract for November delivery was up 6 yen, or 1.4percent, at 435 yen (USD2.72) per kg, rising for a second straight session and touching a high of 438.8 yen earlier. The rubber contract on the Shanghai Futures Exchange (SHFE) for September delivery rose 115 yuan, or 0.64percent, to 18,165 yuan (USD2,682.80) per metric ton. The most-active July butadiene rubber contract on the SHFE fell 55 yuan, or 0.37percent, to 14,655 yuan per ton. Prices of Thailand’s benchmark export-grade smoked rubber sheet (RSS3) and block rubber were up 4.19percent and 1.48percent, respectively. Both benchmarks reached highs last seen in early January 2017, when off-season flash floods in southern Thailand restricted supply. This year, heavy rains have restricted tapping in Thailand.

Dryness and high temperatures in other top producers such as Indonesia and Malaysia have resulted in lower rubber yields, according to several analysts.

Persistent strength in the dollar sent the yen sliding to the key 160 level on Wednesday. A weaker Japanese currency makes yen-denominated commodities more affordable for foreign buyers.

Oil prices rose over 1percent on Wednesday, extending gains from the previous session, as hostilities in the Middle East erupted anew and talks between Tehran and Washington showed little progress. Natural rubber often tracks 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 July delivery last traded flat at 234.4 US cents per kg as of 0700 GMT.