TOCOM snaps 4-day rally on position adjustment, but posts weekly gain

TOKYO, June 30 (Reuters) - Benchmark Tokyo rubber futures shed early gains to snap a four-day rally on Friday, as investors adjusted positions ahead of the weekend, but still posted a weekly increase of more than six percent.

The Tokyo Commodity Exchange (TOCOM) rubber contract for December delivery finished down 4.4 yen, or 2.1 percent, at 201.0 yen ($1.8) per kg. Earlier in the session, it hit a one-month high of 206.9 yen.

For the week, it rose 6.2 percent, but was down for a fifth consecutive month and lost about 24 percent in the first half of the year.

"Despite today's slide due to position adjustments, it seems that the market has hit the bottom as proven by a chart," said Jiong Gu, analyst, Yutaka Shoji Co.

TOCOM rubber may rise into a range of 223.10-236.70 yen per kg in three months, as suggested by its wave pattern and a Fibonacci retracement analysis.

The most-active rubber contract on the Shanghai futures exchange for September delivery dropped 10 yuan to finish at 13,335 yuan ($1,967) per tonne.

"Shanghai also recovered the key 13,000 yuan level this week on expectations for stronger tyre demand in China," Gu said.

On an upside, the Tokyo market has shifted from backwardation to contango as inventories at TOCOM warehouses started rising, signalling a healthy market condition, Gu said.

In contango, longer-dated futures are more expensive than near-term contracts.

Rubber inventories at TOCOM warehouses stood at 2,251 tonnes, as of June 20, up from 1,932 tonnes 10 days ago, according to the bourse. The stock level has recovered since hitting its lowest since 2010 earlier this year.

Rubber inventories in warehouses monitored by the Shanghai Futures Exchange rose 0.3 percent from previous Friday, the exchange said.

The front-month rubber contract on Singapore's SICOM exchange for July delivery last traded at 150.4 U.S. cents per kg, down 1.1 cents.

Tocom Rubber weekly, dated 30 JUN 2017

TOCOM natural rubber futures price was sharply up against the bottom of 185.00 yen on June 8 to 216.00 yen on the 16th, but then it fell back to 200 yen again afterwards.

Indicated signs of selling at the production area due to sudden price drops, and the Thai government was also taking the initiative to tackle this problem, under the leadership of a short-term short cover (repurchase) led to an autonomic repulsive phase. However, as a result, market situation measures that can be expected to be effective are not laid out, and the weight of the upper price is recognized again.

Three countries, Thailand, Indonesia and Malaysia, held discussions on June 17-18. Although the content of the consultation there has not been made public, the chairman of the Indonesian Rubber Association shows the recognition that "There is no problem" about the recent plunge of natural rubber prices after consultation.

Although the Thai government has shown a strong sense of crisis in the present situation, Indonesia seems to be a speculative dropdown not based on fundamentals, and did not admit the necessity of intervention in market conditions. At least it is probable that the possibility of raising natural rubber prices through international cooperation is low at the current price level.

In Thailand, which has a relatively high cost line, subsidies for rubber farmers are decided. While USS spot price cuts below 1 baht = 60 baht, it will be in the shape of acknowledging the necessity of market measures. However, as for grant issuance, it is a factor that hinders the movement of demand-supply rebalancing accompanying the price decrease, so it can not approve the effectiveness as a market situation countermeasure.

The Thai government is calling for the necessity to raise the rubber price up to 70 baht, but unless a stronger marketing countermeasure, which was set as the direct purchase by the government and setting of the lowest price, is set out, the natural rubber price will be full-fledged by policy It will be difficult to rise.

Production pickup amount showed a sharp decline after entering June, but after that it is a move to update the highest season this season. No particular troubles are reported in the climatic environment of the production area, and if the collection pickup reflecting the seasonal factors continues as it is, the rubber price will once again increase the risk of devaluation of the lower price.

Although there is no doubt that the sense of crisis against the plunge of the rubber market is beginning to rise in the producing country, the development will continue to devalue the level in a form that considers the allowable low limit line of the producing country.

Oil extends recovery as U.S output falls

Oil continued to recover Thursday for the sixth session in a row supported by a fall in U.S. output in the latest week and a drop in gasoline inventories. U.S. crude was up 54 cents, or 1.21%, at $45.28 at 08:00 ET. Brent added 56 cents, or 1.18%, to $48.10.

The Energy Information Administration Wednesday reported a fall in U.S. output of 100,000 barrels a day in the latest week to 9.3 million.The drop might have been due to temporary factors such as weather conditions and maintenance work.

The EIA also reported a larger-than-expected drop in gasoline inventories, but crude inventories were up 118,000 barrels against a forecast fall of about 2.5 million.

Major producers are under growing pressure to beef up output curbs as supply concerns continue to overhang the market.

OPEC and non-OPEC producers have agreed to reduce output by 1.8 million barrels a day through to March.Higher U.S. drilling activity and output rises by Nigeria and Libya, which have been exempt from the OPEC-led cuts, continue to work against the curbs as inventories remain high.

UAE energy minister says no talk about further OPEC supply cuts

PARIS, June 29 (Reuters) - There is no talk of further oil output cuts by the Organization of the Petroleum Exporting Countries and its allies despite only a slow drawdown in inventories, the United Arab Emirates' energy minister said on Thursday.

"I think OPEC countries and non-OPEC countries who joined us have done their part. We are looking at the others to do their part as well. We are not worried about the market recovery," Suhail bin Mohammed al-Mazroui told journalists on the sidelines of a conference in Paris.

OPEC and allied non-OPEC producers agreed on May 25 to extend an existing supply curb into 2018, but oil prices have fallen on rising production from the United States and from Nigeria and Libya, two OPEC members exempt from cutting output.

"Of course additional production coming from several producers is prolonging the recovery but I think that is rather short-term. We hope to see more recovery in the third and fourth quarters," he said.

"There has been a correction, yes, the correction is a little bit slower than expected. We are at the bottom of the second quarter and it is always a low-demand quarter. Third and fourth quarters, we will have a pick-up in demand and hopefully reach a more balanced market," Mazroui said

TOCOM hits 1-month high on firm oil, Shanghai

TOKYO, June 29 (Reuters) - Benchmark Tokyo rubber futures ended higher for a fourth straight session on Thursday after hitting a one-month high earlier, buoyed by firm oil futures and bullish Shanghai futures, dealers said.

Rubber also got support from a slightly weaker yen against the dollar, which makes commodities denominated in the Japanese currency cheaper for holders of other currencies.

Tokyo Commodity Exchange (TOCOM) futures, which set the tone for tyre rubber prices in Southeast Asia, may rise into a range of 223.10-236.70 yen per kg in three months, as suggested by its wave pattern and a Fibonacci retracement analysis, according to Wang Tao, a Reuters market analyst.

The Tokyo Commodity Exchange rubber contract for December delivery finished 6.2 yen higher at 205.4 yen ($1.82) per kg after earlier touching 206.1 yen, the highest since May 31.

The most-active rubber contract on the Shanghai futures exchange for September delivery rose 460 yuan to finish at 13,500 yuan ($1,991) per tonne after hitting 13,680 yuan, the highest since May 26.

The front-month rubber contract on Singapore's SICOM exchange for July delivery last traded at 151.70 U.S. cents per kg, up 7.3 cents.

China stocks end higher, strong commodity shares lend support

SHANGHAI, June 29 (Reuters) - China stocks rose on Thursday, driven by strong gains in raw material shares as a weaker dollar lifted commodities prices.

Sentiment was also boosted by easing fears of a quarter-end liquidity crunch in the banking system, as well as a rise in the yuan, which assuaged concerns about capital outflows.

The blue-chip CSI300 index rose 0.6 percent, to 3,668.83 points, while the Shanghai Composite Index gained 0.5 percent to 3,188.06 points.

The raw material sector firmed 0.9 percent as global commodity prices rose on the back of a weaker U.S. dollar.

"The weaker dollar benefited China's commodity-related stocks in an indirect way," said Chen Yong, analyst at Lianxun Securities.

"Besides, a strengthening yuan eases capital outflow fears."

Reflecting the dollar's broad weakness, China's yuan rose against the dollar on Thursday to its highest level in 7-1/2-months.

Receding fears of capital outflows from China added to relief that China's banking system does not appear to be suffering from a cash shortage at the end of the second quarter, as some had feared.

Citing "relatively high" liquidity, China's central bank skipped open market operations for the fifth day in a row on Thursday.

Shares in China's coal miners were particularly strong, as the country said it will ban coal imports at small ports from July 1, boosting China's coking coal futures.

Shanxi Coking surged the maximum allowed 10 percent, while Shanxi Xishan Coal jumped 4.4 percent.

Moody’s official says not to blow recent China downgrade out of proportion

The recent reduction in China’s credit rating by Moody’s Investors Ratings should not be blown out of proportion because the country still has time to implement key reforms, a top Moody’s official said Wednesday.

“We think China’s credit strength will provide time for reform. It’s just a matter of how fast the reform takes place,” Elena Duggar, chair of the Macroeconomic Board at Moody’s Investors Ratings, said during a speech at the Center for Strategic and International Studies.

On May 24, Moody’s downgraded its rating of China’s long-term local currency and foreign currency credit from Aa3 to A1, citing rising debt levels and slower economic growth. The credit rating is a measure of a government’s ability to repay its debt.

Despite the downgrade, Moody’s also issued a stable outlook on China, citing the country’s resilience to external conditions and expressing hopes for a financial reform in the near future.

While it is unlikely that China will experience an economic meltdown, other countries would be hurt by reduced trade rather than financial ties with the country if it happened, according to Duggar.

Nicholas Lardy, a Chinese economy expert at the Peterson Institute of International Economics, also cautioned against oversimplifying the diverse array of data that define China’s credit risk.

“The headline numbers are certainly pretty scary, but I think we need to disaggregate,” Lardy said. Lardy used the leverage ratio, which quantifies debt in relation to equity, to illustrate how the Chinese economy is performing.

“If you take the industrial sector, which is not as important as it used to be, and you look at the debt-to-equity ratio over the last decade, it has actually come down,” he said. “It is lower today than it was in 2006.”

He noted that the leverage ratio of state-owned enterprises has risen while that of private companies has dropped, arguing that the real burden of debt lies with the state-owned entities.

Both Duggar and Lardy pointed out that China’s policy of capital control, the government’s relatively small foreign debt, and the lack of securitization in both debt and equity markets make China’s economy less vulnerable to the economic conditions of other countries.

“Moody’s is a little late to the game. As most ratings agencies are, they’re a little late to upgrade or downgrade, much as we saw in the U.S. in 2008,” said Sheldon L. Ray, Jr., a portfolio manager in global equities and bonds who was in the audience at the CSIS event.

“Maybe Moody’s concerns were more relevant in 2015. I’ve come away today a bit more optimistic about China’s economy.”

Rubber fund to be created to shore up rubber prices

A rubber price stabilization fund will be created to intervene in the real rubber and futures rubber markets to shore up rubber prices in order to help rubber growers hard hit by falling rubber prices.

Creation of the fund was agreed by the rubber control committee headed by Agriculture Minister General Chatchai Sarikalya, with six major rubber exporters making contributions to make up the starting fund amounting to 1.2 billion baht.

General Chatchai said the six major rubber exporters which are yet to be named will holds with the Thailand Futures exchange about the terms of rubber futures trading.

He expected the futures trading would begin next week and this would help in pushing up the prices of rubber.

The minister denied that the government had recently sold 30,000 tonnes of rubber from its stockpile as widely reported. He said that he had instructed the deputy permanent secretary, Mr Lertvirote Kowattana, to summon a meeting with local administration bodies about using rubber in road construction.

Earlier, the government set out a policy instructing local administration organizations to use rubber in road construction in their localities. But the policy was not put into practice due to procurement regulations forbidding the use of rubber in road building and maintenance.

TOCOM rubber may rise into 223.10-236.70 yen range in 3 months

SINGAPORE, June 29 (Reuters) - TOCOM rubber may rise into a range of 223.10-236.70 yen per kg in three months, as suggested by its wave pattern and a Fibonacci retracement analysis.

The downtrend from the Jan. 31 high of 366.70 yen has completed, as it could be broken down into five small waves. The bounce from the June 7 low of 178.80 yen has been strong enough to confirm a reversal of the downtrend.

Further indication on a reversal of the downtrend comes from the bullish divergence on the daily MACD, which simply suggests the downtrend could hardly extend more.

Labelled 4, the fourth wave of the downtrend peaked at the May 24 high of 236.70 yen. Wave theory indicates that this high may be approached.

A Fibonacci retracement analysis on the downtrend marks a more realistic target at 223.10 yen, the 23.6 percent level. A high-low bottom forming around 178.80 yen points a target close to 236.70 yen.

It seems all the techniques present a bullish outlook in next quarter. Strategically, the target zone of 223.10-236.70 yen will be confirmed when rubber breaks above the immediate resistance at 206.20 yen.

A correction from the current level may be limited to 192 yen.

Tokyo futures rise for fourth day on firm oil

TOKYO, June 29 (Reuters) - Benchmark TOCOM rubber futures extended gains for a fourth straight session on Thursday, supported by firm oil futures overnight.

FUNDAMENTALS

* The Tokyo Commodity Exchange rubber contract for December delivery rose 1.8 yen to 201 yen ($1.79) per kg by 0009 GMT. The contract on Wednesday hit a near two-week high of 202 yen.

MARKET NEWS

* Oil futures climbed more than 1 percent on Wednesday to their highest in more than a week as buyers were encouraged by a small weekly decrease in U.S. production and shrugged off a surprise build in crude inventories in the world's top oil consumer.

* The U.S. dollar was quoted around 112.32 yen, compared with around 112.15 yen on Wednesday afternoon.

* Japan's benchmark Nikkei stock average was up 0.7 percent.

* Copper, lead and zinc prices hit near three-month highs on Wednesday boosted by sharp falls in the dollar, signs of tighter supply and optimism over Chinese demand, although worries about U.S. economic growth capped the upside.

India Natural Rubber production up by 8.7% in May

In May this year, the production of natural rubber (NR) was 8.7 per cent more than that in the same month last year. Production during May 2017 was 50,000 tonnes, whereas it was 46,000 tonnes in May 2016.

According to Rubber Board data, production in the first two months of the current financial year was around 98,000 tonnes against 85,000 tonnes a year ago. This is an increase of 15.3 per cent.

Board is anticipating production around 8 lakh tonnes for the current year. 

The Board is continuing its activities to make rubber cultivation remunerative by increasing production and reducing the cost of cultivation. It has been implementing several activities at regional and field levels, with the active cooperation of Rubber Producer's Societies (RPSs).

The annual mass contact programme of the Rubber Board this year was aimed at the total excellence of the plantations.

There were about 50,000 participants in 800 meetings conducted at various rubber growing areas as part of the mass contact programme. Practices such as weekly tapping, controlled upward tapping, rain guarding, online fertiliser recommendation, scheme for intercropping to be implemented in collaboration with Kerala state agricultural department and rubber tapper skill development programme under Pradhan Mantri Kaushal Vikas Yojana (PMKVY) were discussed in the meetings.

The second phase of training for 22,000 persons in rubber tapping and processing in Kerala, Tripura, Assam, Tamilnadu and Karnataka, under PMKVY has already begun. In the first phase of the training programme, 10,000 persons were trained. Stipend has been paid to the majority of the participants in the first phase. The impact assessment of already conducted programmes shows positive effects in productivity, said the Board.

TOCOM hits 2-week high as strong Shanghai boosts risk appetite

TOKYO, June 28 (Reuters) - Benchmark Tokyo rubber futures jumped to a 2-week high on Wednesday as stronger Shanghai futures and an overnight gain in oil prices boosted risk appetite, dealers said.

Oil prices rose nearly 2 percent and hit a one-week high on Tuesday, boosted by a weaker dollar and short covering, although they slipped on Wednesday after an industry report said U.S. inventories increased.

The Tokyo Commodity Exchange (TOCOM) rubber contract for December delivery finished 5.6 yen higher at 199.2 yen ($1.78) per kg. It touched the highest since June 16 of 202 yen earlier in the session.

"Shanghai futures rose on expectations of healthier economic indicators in China. That lent support to the TOCOM," said Satoru Yoshida, commodity analyst at Rakuten Securities.

The most-active rubber contract on the Shanghai futures exchange for September delivery surged 285 yuan to finish at 13,080 yuan ($1,924) per tonne.

The front-month rubber contract on Singapore's SICOM exchange for July delivery last traded at 144.0 U.S. cents per kg, up 1.2 cent.

Crude rubber inventories at Japanese ports stood at 4,999 tonnes as of June. 20, up 5.8 percent from the last inventory date, data from the Rubber Trade Association of Japan showed on Wednesday

Tokyo futures surge to 2-week highs after jump in oil prices

TOKYO, June 28 (Reuters) - Benchmark TOCOM rubber futures surged to near two-week highs on Wednesday, driven by an overnight jump in oil prices and a weaker yen against the U.S. dollar.

FUNDAMENTALS

* The Tokyo Commodity Exchange rubber contract for December delivery was up 5.8 yen, or 3 percent, at 199.4 yen ($1.8) per kg as of 0030 GMT.

* The contract earlier hit 202.0 yen, its highest since June 16. A weaker yen makes yen-denominated assets more affordable when purchased in other currencies.

* China's economy continued to improve in the second quarter, with corporate profits rising and hiring up, a private survey showed, but it suggested the Asian giant may have to brace for tougher times ahead even though firms have been able to weather a tighter financing environment.

* European Central Bank President Mario Draghi opened the door to tweaks in the bank's aggressive stimulus policy on Tuesday, fuelling market expectations that the ECB will announce a reduction of stimulus as soon as September.

* For the top stories in the rubber market and other news, click or

MARKET NEWS

* Oil prices rose nearly 2 percent and hit a one-week high on Tuesday, boosted by a weaker dollar, short covering and expectations that crude inventories in the United States may decline for a third consecutive week.

* The U.S. dollar eased from a more than one-month high against the Japanese currency of 112.46 yen on Tuesday, touched earlier in the session, and was last just 0.3 percent higher at 112.12 yen.

* Japan's benchmark Nikkei stock average was down 0.3 percent on Wednesday after stocks on Wall Street finished at session lows the previous day

TOCOM steady as investors adjust positions; trade thin

TOKYO, June 27 (Reuters) - Benchmark Tokyo rubber futures steadied in thin trade on Tuesday as investors made position adjustments following the start of the new December contract while nagging worries about oversupply in Asia capped gains from stronger oil prices and a weaker yen.

Oil prices rose for a fourth consecutive session on Tuesday as investors covered short positions, although worries over a persistent global supply glut still lingered.

The dollar rose on Tuesday to its highest level against the yen in nearly five weeks ahead of comments from Federal Reserve Chair Janet Yellen that are expected to underline her positive view of the U.S. economic outlook.

A weaker yen makes yen-denominated assets more affordable when purchased in other currencies.

The Tokyo Commodity Exchange (TOCOM) rubber contract for new December delivery finished at 193.6 yen ($1.74) per kg, unchanged from its opening price. It rose to a high of 195 yen earlier in the session.

"Investors were adjusting their positions to match a gradual shift from backwardation to contango in the TOCOM," said Hiroyuki Kikukawa, general manager of research at Nissan Securities.

"Besides, there was no fresh news," he added.

In contango, longer-dated futures are more expensive than near-term contracts.

The most-active rubber contract on the Shanghai futures exchange for September delivery rose 270 yuan to finish at 12,955 yuan ($1,899.95) per tonne.

The front-month rubber contract on Singapore's SICOM exchange for July delivery last traded at 141.0 U.S. cents per kg, up 0.8 cent

Oil up for 4th day on short-covering, supply glut caps gains

SINGAPORE, June 27 (Reuters) - Crude oil futures rose for a fourth consecutive session on Tuesday as investors covered short positions, though worries over a festering supply glut kept a lid on prices.

U.S. West Texas Intermediate (WTI) crude futures were up 12 cents, or 0.3 percent, at $43.50 per barrel by 0323 GMT. Brent crude futures gained 14 cents, or 0.3 percent, to $45.97 per barrel.

The market is up slightly so far this week after dropping for the past five weeks.

"The market has fallen a lot as the news has been bad pretty consistently for the oil market," said Ric Spooner, chief market analyst at CMC Markets in Sydney.

"It has moved a long way in response to that news. Maybe we are getting to a point that there is upside risk to any good news?"

The Organization of the Petroleum Exporting Countries (OPEC) and its partners have been trying to reduce a global crude glut with production cuts. OPEC states and 11 other exporters agreed in May to extend cuts of 1.8 million barrels per day (bpd) until March.

However, Nigeria and Libya, OPEC members exempt from the cuts, have raised output.

Iran was allowed a small increase to recover market share lost under Western sanctions over its nuclear programme. It said its production has surpassed 3.8 million bpd and is expected to reach 4 million bpd by March.

And U.S. shale oil output has risen around 10 percent since last year, with the number of U.S. oil rigs in operation at the highest in more than three years.

Hedge funds and other money managers appear to have abandoned all hope that OPEC will rebalance the oil market, slashing formerly bullish bets on crude futures and options, John Kemp, a Reuters market analyst wrote in a column.

"Exchange data showed that speculators had cut their net long positions in WTI and Brent to (the) lowest level in 10 months last week," ANZ said in a note.

"Traders are also looking ahead to the EIA Energy Conference in Washington, where U.S. shale oil producers are expected to give their view of current market conditions."

Analysts at Bank of America-Merrill Lynch said demand had not grown quickly enough to absorb excess output.

As the global oil market frets about a stubborn supply glut, faltering demand growth in key Asian crude importers is further hampering efforts to restore market balance.

A fuel glut in China, a hangover from demonetisation in India, and an ageing, declining population in Japan are holding back crude oil demand growth in three of the world's top four oil buyers.

Tokyo futures edge down as oversupply concerns weigh

TOKYO, June 27 (Reuters) - Benchmark TOCOM rubber futures inched lower in light trade on Tuesday on lingering concerns about oversupply in Asia, but firmer oil prices and a softer yen offered some support.

FUNDAMENTALS

* The Tokyo Commodity Exchange rubber contract for new December delivery was at 193.1 yen ($1.70) as of 0030 GMT, down 0.5 yen from an opening price of 193.6 yen.

* The June contract expired at 194.6 yen on Monday.

* General Motors Co now expects U.S. new vehicle sales in 2017 to be in the "low 17 million" unit range, reflecting a widespread expectation that the industry is headed for a moderate downturn, a top executive said on Monday.

MARKET NEWS

* Oil prices settled more than half a percent higher on Monday as some traders found bargains after last week's seven-month lows, but rising crude supply in the United States and other countries limited gains.

* The U.S. dollar hit a one-month high against the yen on Monday as investors awaited Federal Reserve Chair Janet Yellen's speech on Tuesday. It was quoted around 111.93 yen early on Tuesday. A weaker yen makes yen-denominated assets more affordable when purchased in other currencies.

* Japan's benchmark Nikkei stock average rose 0.3 percent on Tuesday.

TOCOM rises on firm oil, Shanghai futures

TOKYO (June 26): Benchmark Tokyo rubber futures gained 0.4% on Monday, as firm oil prices and a rise in Shanghai futures provided support.

Tokyo Commodity Exchange (TOCOM) futures, which set the tone for tyre rubber prices in Southeast Asia, edged up as oil prices rose 1 percent on a weaker dollar, but worries over sluggish rubber demand remained, dealers said.

The Tokyo Commodity Exchange rubber contract for November delivery finished 0.8 yen higher at 190.1 yen (US$1.71) per kg after touching 195.2 yen earlier, the highest since June 20.

The front-month contract for June delivery expired on Monday.

The most active rubber contract on the Shanghai futures exchange for September delivery rose 155 yuan to finish at 12,730 yuan (US$1,860) per tonne.

Singapore's SICOM exchange was closed on account of a public holiday. 

Shortage of local raw rubber material

According to the Viet Nam Rubber Association (VRA), most of the materials are imported for re-export and only partly meet the needs of local tyre manufacturers.

Most of the imported rubber materials are TSR 10 and TSR 20, which are in huge demand by tyre companies but are only produced locally in small quantities due to low prices.

Nguyen Dinh Dong, deputy general director of the Southern Rubber Industry Joint Stock Company (Casumina), says 75 per cent of Casumina’s input is domestic natural raw materials. It has to import the rest from Malaysia or Thailand to produce high-grade steel belted tyres.

According to Dong, there is also a difference in quality between the SVR 10 and SVR20 made in Viet Nam and those produced in other Southeast Asian countries. “This is also the reason we import TSR10 and TSR20 to produce steel belted tyres.”

On the other hand, most rubber raw material factories in Viet Nam have low capacity and do not meet the requirements of quality uniformity.

Da Nang Rubber Joint Stock Company (DRC) also needs about 18,000 tons of natural rubber annually, mainly SVR10 and 20, but often is unable to find sufficient domestic supply.

Thai Hong Khang, director of the Rubber Technology Centre at the Viet Nam Rubber Research Institute, attributed the shortage to the way domestic raw material producers do business. “When global rubber prices soar, raw material suppliers are often concentrated entirely on exports, but when prices drop sharply, they then turn to the domestic market.”

This frustrates domestic tire manufacturers who then prefer imports that they can obtain quickly, Khang said.

Product structure

According to Tran Thi Thuy Hoa, head of the VRA rubber development consultancy, SVR 10 and SVR 20 only account for about 15-17 per cent of local demand, while the actual demand is up to 65-70 per cent.

Domestic raw material producers only focus on producing high-end premiums, such as SVR3L, SVR-CV 50, SVR-CV 60, with little attention paid to the SVR10 and 20 production line.

VRA statistics show that from 2016 to date, the price of SVR10 has been US$40-220 per tonne lower than the price of SVR3L. Therefore, investment in SVR3L production yields higher profits.

However, market demand is tilted towards SVR10 and SVR20. In the tyre industry, SVR 3L is mainly used to produce tubes, but the market is now favouring tubeless tires, thus sales of SVR 3L are difficult.

Global forecasts also put the demand for natural rubber at 15 million tonnes, only 150,000 tonnes of which are SVR 3L.

If businesses do not reduce SVR 3L output and keep investing in expanding production, they will face the risk of an excess supply of 300,000 tonnes.

Realising the trend, some enterprises have started to invest in new SVR 10, SVR 20 rubber production lines instead of SVR 3L. Tran Thanh Phung, deputy general director of the Phu Rieng Rubber Company, says the company has invested in a SVR 10 production line and is supplying raw materials for big tire companies such as Goodyear and Kumho.

However, the SVR10 output accounts for only 20-25 per cent of the firm’s total output. Adding lines to increase SVR10 and SVR20 output to meet market needs will be weighed against prospects of ensuring profit in the future, Phung said.

Experts say investment in new production lines for SVR10 and SVR20 rubber requires enterprises to adopt new business strategies to reach the market. 

TOCOM hits near 1-week high on oil gains

TOKYO, June 26 (Reuters) - Benchmark TOCOM rubber futures hit a near one-week high on Monday, tracking gains in oil prices.

FUNDAMENTALS

* The Tokyo Commodity Exchange rubber contract for November delivery rose 2.8 yen to 192.1 yen ($1.73) per kg by 0030 GMT, after touching 195.2 yen earlier, the highest since June 20.

* The front-month contract for June delivery expires later in the day.

* Rubber inventories in warehouses monitored by the Shanghai Futures Exchange rose 1.1 percent from the previous week, the exchange said on Friday.

* For the top stories in the rubber market and other news, click or

MARKET NEWS

* Oil futures extended gains on Monday with a lift from a weaker dollar, but glut worries still remained due to increasing U.S. drilling activity.

* The U.S. dollar was quoted around 111.25 yen, compared with around 111.32 yen on Friday afternoon.

* Japan's benchmark Nikkei stock average was little changed.

* Copper prices reached their highest since April 7 on Friday as rising Chinese stock markets and strong European manufacturing data prompted investors to bet on higher prices.

TOCOM inches down, ends week with 6 pct fall

TOKYO, June 23 (Reuters) - Benchmark Tokyo rubber futures inched down in lacklustre trade on Friday, ending the week with a 6 percent drop, as investors worried about oversupply in Asia.

"With no fresh news, investors were just making adjustments on their position ahead of the weekend and the expiry of the June contract next Monday," said Toshitaka Tazawa, analyst at Fujitomi Co.

Oil prices also edged up on Friday, recovering some of their steep losses this week, although crude remained on course for its worst first-half decline in almost two decades as production cuts have failed to sufficiently reduce oversupply.

The Tokyo Commodity Exchange (TOCOM) rubber contract for November delivery finished 0.2 yen lower at 189.3 yen ($1.70) per kg. For the week, it fell 5.8 percent.

"I think the TOCOM will stay in a 180-190 yen or 170-200 yen range unless there are some fundamental surprises such as cyclone or fire in producing countries," Tazawa said.

The most-active rubber contract on the Shanghai Futures Exchange for September delivery fell 50 yuan to finish at 12,670 yuan ($1,853) per tonne.

Rubber inventories in warehouses monitored by the Shanghai Futures Exchange rose 1.1 percent from the previous Friday, the exchange said on Friday.

The front-month rubber contract on Singapore's SICOM exchange for July delivery last traded at 139.4 U.S. cents per kg, up 2.1 cent. 

Natural Rubber Supply Rises, Rubber Price Drops

Rubber price movements again ended in the red zone in trading today, Friday (06/23/2017), due to burdened by the prospect of rising supply and slow purchasing activity.

The price of rubber for delivery in November 2017, the most active contract on the Tokyo Commodity Exchange (Tocom), closed down 0.11% or 0.20 points to 189.30 yen per kilogram (kg).

This morning, even opened the rubber price with a sharp weakening of 1.06% or 2 points at position 187.50.

In fact, the price of November contract rubber managed to score a rebound almost two percent yesterday after falling for several days earlier.

"Supply continues to rise, while there is no new resolution on export restrictions by some exporting countries," said We Tan, marketing manager at Shanghai Reascent Industrial, as quoted by Bloomberg.

At the same time, he added, the purchasing rate looks much slower than the supply growth rate.

As is known, meeting rubber exporting countries at the meeting last weekend did not spawn the results or agreement as expected.

On the other hand, the amount of inventories in China rose with the expected increase in supply due to the continuing rubber tapping process.

Total rubber stocks monitored by the Shanghai Futures Exchange rose 1.8% to 353,222 tonnes on June 15, the highest level since Nov. 17.

In addition to pressing the rubber, the yen today continued to appreciate 0.07% or 0.08 points to 111.25 yen per US dollar at 13:53 pm, after yesterday closed up 0.04% at 111.33.

Booming U.S. shale production sends oil into bear market territory despite OPEC efforts

Oil prices recovered slightly on Thursday morning, after falling to their lowest level in around ten months a day earlier amid lingering concerns over strong shale output growth in the U.S.

U.S. crude was at $42.89 a barrel in New York trade, up 36 cents, or around 0.9%, after touching its lowest since August 11 at $42.05 in the prior session.

Brent oil tacked on 52 cents to $45.34 a barrel. The global benchmark hit $44.35 on Wednesday, a level not seen since November 14.

Since peaking in late February, oil has dropped around 20%, meeting the technical definition of a bear market.

Crude prices have been under pressure in recent weeks as concerns over a steady increase in U.S. production added to fears over a glut in the market.

U.S. drillers last week added rigs for the 22nd week in a row, according to data from energy services company Baker Hughes, implying that further gains in domestic production are ahead.

According to the U.S. Energy Information Administration, domestic output climbed by 20,000 barrels to 9.35 million barrels a day last week, almost 8% higher than the same period last year.

The increase in U.S. drilling activity and shale production has mostly offset efforts by OPEC and other producers to cut output in a move to prop up the market.

Last month, OPEC and some non-OPEC producers extended a deal to cut 1.8 million barrels per day in supply until March 2018.

So far, the production-cut agreement has had little impact on global inventory levels, prompting market analysts to downgrade their oil price forecast for this year to as low as $20.