Tokyo rubber faltered on Tuesday as bearish technicals and weakness in other yen-based commodities prompted investment funds to lock in positions on rallies. Trading was nervous amid uncertainty over the outlook of physical supplies from the world's top supplier, Thailand.
But Tokyo rubber futures found some support as traders rolled over positions to the distant-end of the market after the expiry of the June contract the previous day.
The new benchmark rubber contract on the Tokyo Commodity Exchange for December delivery closed at a session low of 264.5 yen a kg after debuting at 264.9 yen on Tuesday. Its intraday high was 267.4 yen. The previous benchmark November contract finished down 1.0 yen at 265.9 yen from Monday. The spot July contract was down 0.3 yen at 269.2 yen.
"The market has been in a downtrend in the last month after hitting an extremely tough resistance at 300 yen," said Hiroyuki Kikukawa, associate director at Nihon Unicom Inc Kikukawa said, however, the market will be reluctant to sell key rubber below a low of around 256 yen, reached in March, due to uncertainty about the outlook of supplies.
"We are hearing that tapping in Thailand was delayed by heavy rain," Kikukawa said. "We have to see whether the market will receive enough shipments from Thailand in coming weeks."
Supply concerns increased the previous day after a fire at a rubber plant in Thailand, but such worries faded by Tuesday morning as it was not likely to affect overall supplies in the long run, Tokyo traders said. A senior Thai police official said on Monday that a fire destroyed some rubber stocks at a plant in southern Thailand over the weekend.
The fire at the rubber exporting plant, 30 kilometres (20 miles) from the southern city of Hat Yai, lasted about 10 hours before it was put out after causing damage worth about 200 million baht, he said. The Tokyo market had, by Tuesday morning, digested the news, which came after the Tokyo close the previous day.
TOCOM rubber had climbed almost 1 percent by the close on Monday amid the rumour of the fire. Traders said technical trend of TOCOM rubber stayed bearish as the key contract struggled below the seven-day moving average of 267.2 yen and the 14-day average of 268.4 yen.
"Heavy sales would emerge once when the key contract breaks below 256 yen," Kikukawa said. The level would be important with the 200-day moving average also seen at 253.8 yen, traders said. In the Asian physical market, prices were mostly unchanged on Tuesday as dealers cautiously watched movements in Tokyo futures, where the new benchmark contract started trading.
On Monday, Indonesia's SIR20 for August was traded at 94.50 cents FOB at Palembang and at 94.50-95.00 cents FOB at Belawan. September SIR20 was traded at 94.50 cents FOB at Palembang and at 94.75 cents FOB at Belawan.