TOCOM falls over 2% on worries over rising inventories

Benchmark Tokyo rubber futures fell more than 2% on Monday as higher inventories in both Tokyo and Shanghai prompted selling, while weaker oil prices and a stronger yen against the US dollar also weighed on market sentiment.

"Rubber prices have come under pressure due to an increase in rubber inventories in Japan and China," said Toshitaka Tazawa, an analyst with Fujitomi Co.

Crude rubber inventories at Japanese ports stood at 6,723 tonnes as of July 10, up 5.9% from the last inventory date, data from the Rubber Trade Association of Japan showed on Thursday.

Rubber inventories in warehouses monitored by the Shanghai Futures Exchange rose 1.5% from the previous Friday, the exchange said on Friday.

The Tokyo Commodity Exchange (TOCOM) rubber contract for December delivery closed 5.2 yen, or 2.4%, lower at 209.3 yen (US$1.9) per kg, after touching a low of 206.9 yen earlier in the session.

The most-active rubber contract on the Shanghai futures exchange for September delivery slid 405 yuan to finish at 13,515 yuan (US$2,002) per tonne.

On the downside, oil prices held near a one-week low on Monday ahead of a joint OPEC and non-OPEC meeting later in the day that may address rising output in Nigeria and Libya.

The dollar slipped 0.15% to 110.970 yen, with the Japanese currency at its strongest in roughly five weeks, as US political turmoil dampened hopes for quick passage of President Donald Trump's stimulus and tax reform agendas and the euro extended gains.

"I expect the TOCOM to stay trapped in a narrow range of around 200 yen this week with lack of fresh news," Tazawa said.

The front-month rubber contract on Singapore's SICOM exchange for August delivery last traded at 153.4 US cents per kg, down 2.3 US cents.

Japan's Asahi Kasei Corp said on Monday it will expand its plant to produce styrene-butadiene rubber, a synthetic rubber used for fuel-efficient tires, in Singapore by 30,000 tonnes a year to 130,000 tonnes a year.

(US$1 = 110.8100 yen)

(US$1 = 6.7516 Chinese yuan)