TOCOM HITS 16-MONTH HIGH ON HOPES OF STRONG CHINESE DEMAND

Benchmark Tokyo rubber futures hit a near 16-month high on Thursday, extending gains for a third day, buoyed by expectations of higher demand from top buyer China and supply worries, though it pared some of its earlier gains on profit-taking.

Tokyo Commodity Exchange (TOCOM) futures, which set the tone for tyre rubber prices in Southeast Asia, have risen more than 30 percent since the end of September, while the Shanghai rubber futures have gained more than 20 percent.

"The market has been driven by a rally in China's rubber prices after Beijing tightened trucking rules in September, boosting distribution costs and bolstering expectations for higher tyre demand for trucks," said Jiong Gu, an analyst at Yutaka Shoji Co, referring to the stricter regulations on how much cargo trucks are allowed to carry.

"We are also hearing some shortage of rubber supply in Southeast Asia, which may be due to labour shortage or output curb in a bid to support prices," he said, adding risk-on in global financial markets after Donald Trump's win in the U.S. presidential election was also behind the bull trend.

The TOCOM rubber contract for April delivery finished 0.7 yen higher at 213.1 yen ($1.95) per kg on Thursday, after touching 217.1 yen, highest since July 2015.

The most-active rubber contract on the Shanghai futures exchange for January delivery rose 365 yuan to finish at 16,505 yuan ($2,402.82) per tonne.

"I don't know how long this rally will continue, but the market sentiment is firm amid hopes for higher demand in China and supply concerns," Gu said.

The front-month rubber contract on Singapore's SICOM exchange for December delivery last traded at 170.4 U.S. cents per kg, down 0.6 cents.