Tokyo Rubber Surges With Yen’s Dive as Thai Supply Declines

Rubber buyers in Japan are getting a tough deal as a weaker yen compounds the pain of rising international prices.

Rubber futures on the Tokyo Commodity Exchange priced in yen have risen as much as 14 percent this year to a 16-month high while the Japanese currency fell to a 12-year low, as the attached chart shows. That compares with a gain of as much as 11 percent in dollar-denominated contracts. The country is the fourth-biggest consumer of natural rubber, ranked behind China, India and the U.S.

The yen is tumbling while rubber supplies are shrinking from Thailand, the world’s biggest exporter. Costs in U.S. dollars are rising because of a seasonal drop in supply, accelerating the surge in yen-based Tocom prices, according to Kazuhiko Saito, an analyst at Fujitomi Co. in Tokyo.

“A weakening yen is further boosting costs to import rubber to Japan from Thailand,” Saito said. “Thai supply is around the lowest level of the year because of a low-production season, raising export prices.”

Rubber priced in dollars traded in Singapore rose to $1.90 a kilogram on Friday, the highest in almost 10 months. Thailand was in the so-called wintering season from February to May, when rubber trees shed leaves and farmers halt tapping. Exports in the first four months of the year are down 26 percent at 1.17 million metric tons, according to data from the Thai commerce ministry.

The yen slid to 125.05 a dollar on Tuesday, the weakest since 2002, amid speculation that the U.S. Federal Reserve will raise rates this year, while Japanese policy makers press on with unprecedented stimulus to revive growth.

Non-Japanese investors made up a record 49.6 percent of the Tocom’s total volume in March and 49 percent in April, according to spokeswoman Sayaka Sato. Australia was the biggest foreign holder of rubber positions in April, followed by Singapore and Hong Kong, according to bourse data. Rubber was the third-most traded contract on the exchange in the last fiscal year through March.

Foreign investors can take advantage of the rise in Tocom prices even as the Japanese currency may weaken further by locking in their price to convert yen to dollars to limit losses, according to Saito, whose company handles futures orders from overseas firms.