Japanese rubber futures decline as high prices temper demand

SHANGHAI: Japanese rubber futures snapped two consecutive sessions of gains on Thursday, tracking crude prices, while high raw material prices spurred caution among manufacturers over procurement.

The Osaka Exchange (OSE) rubber contract for November delivery was down 7.6 yen, or 1.74percent, at 428.5 yen (USD2.68) per kg. The rubber contract on the Shanghai Futures Exchange (SHFE) for September delivery was down 280 yuan, or 1.54percent, at 17,925 yuan (USD2,646.69) per metric ton. The most active July butadiene rubber contract on the SHFE fell 365 yuan, or 2.49percent, to 14,300 yuan per metric ton. Oil prices fell on Thursday as a ceasefire deal between Israel and Lebanon boosted hopes for a broader agreement to end the US-Israeli war with Iran that could lead to a reopening of the Strait of Hormuz.

Natural rubber often takes direction from oil prices as it competes for market share with synthetic rubber, which is made from crude oil. Rubber product manufacturers in China, who mostly still have sufficient raw material inventory, are cautious about procuring more raw materials amid persistently high prices, Chinese broker Rich Futures said in a note.

Prices of Thailand’s benchmark export-grade smoked rubber sheet (RSS3) and block rubber are currently at a nine-year high, according to LSEG-compiled data.

However, steady demand for rubber in China from high tyre factory operating rates, steady tyre exports and strong heavy truck sales curbed the downside, several Chinese brokers said.

In addition, natural rubber supply from the Chinese provinces of Hainan and Yunnan is expected to increase, analysts from broker Southwest Futures said in a note. The front-month rubber contract on Singapore Exchange’s SICOM platform for July delivery last traded at 230.6 US cents per kg, down 1.6percent as of 0700 GMT.