Tokyo rubber futures are expected to weaken in November as the debt crisis in Europe continues to rattle financial markets and cloud the outlook for the world economy, but a seasonal fall in physical supply may provide support, a Reuters poll showed.
The benchmark sixth-month rubber contract on the Tokyo Commodity Exchange (TOCOM), currently April 2012, was forecast to be at 290 yen per kg at the end of November, according to the poll conducted late last week. That was 5.8 percent lower than the actual closing price at the end of October of 307.9 yen and well below the previous forecast in a similar poll early last month of 320 yen.
The landscape has changed dramatically since the latest forecasts came in, with the Greek government, out of the blue, calling a referendum on a bail-out deal agreed with the European Union. "The European debt crisis will definitely weigh on the global financial markets as well as rubber futures," said a trader in Hat Yai, the centre of Thailand's rubber centre.
TOCOM futures fell more than 3 percent on Wednesday morning in response to the developments in Europe. At 0540 GMT, April 2012 futures stood at 290.6 yen. "Another negative factor this week that could add to the downward pressure on prices is the MF bankruptcy," said a Bangkok-based dealer, referring to futures broker MF Global Holdings Ltd. The bankruptcy, and especially news that the broker had failed to keep its customer accounts separate from its own funds, could make investors nervous about putting money into futures.
SEASONAL SUPPLY FALL The benchmark TOCOM contract was forecast to rise slightly to 300 yen per kg by the end of December. "Prices should be higher at the end of the year due to falling supply in Thailand," said a Tokyo-based trader. Thailand is the world's biggest rubber producer. The bulk of its rubber is produced in the south, which has not been affected by the devastating floods elsewhere in the country.
However, the rainy season in the south is due to start in November and run until the end of December, disrupting tapping and therefore reducing supply. Thailand's benchmark smoked rubber sheet (RSS3) was forecast to be at $3.95 per kg at the end of November and $4.00 at the end of the year. It was at $4.00 at the end of October but had fallen to $3.80 by Wednesday, November 2.