TOCOM hits 5-week closing high amid physical supply woes

Benchmark Tokyo rubber futures hit a five-week closing high on Wednesday, extending gains for a seventh consecutive session, buoyed by a surge in the nearest-month contract amid concerns over tight physical supplies at the TOCOM warehouses.

The Tokyo Commodity Exchange (TOCOM) rubber contract for October delivery finished up 1.7 yen at 229.7 yen (US$2.04) per kg, marking the highest close since April 10.

"The Tokyo market was boosted by surging price of the May contract as some investors were trying to make balance settlement at the last minute," said Hiroyuki Kikukawa, general manager of research at Nissan Securities.[X] CLOSESponsored Content The May contract, which is due to expire on May 25, soared 12.1 yen to close at 309.5 yen per kg.

As of April 30, rubber inventories at TOCOM warehouses stood at 1,247 tonnes, down 85% from a year earlier, and the lowest since July 2010, a level low enough to pose a risk of sudden price swings.

"Once investors with open interest in the May contract finished unwinding their positions, I expect the market will start falling again as automobile demand seems to be falling in the United States and China," Kikukawa said.

The most-active rubber contract on the Shanghai futures exchange for September delivery rose 85 yuan to finish at 13,785 yuan (US$2,000.8) per tonne.

The front-month rubber contract on Singapore's SICOM exchange for June delivery last traded at 155.3 US cents per kg, down 1.6 US cent.

(US$1 = 112.4300 yen)

(US$1 = 6.8898 Chinese yuan)