TOCOM hits 3-mth high on hopes of price-supporting action by producers

Benchmark Tokyo rubber futures rose nearly 2% on Thursday to a 3½-month high, helped by expectations of tighter supplies in Tokyo and hopes that top rubber producers may agree on measures to help shore up prices.

Tokyo Commodity Exchange (TOCOM) futures, which set the tone for rubber prices in Southeast Asia, rallied despite slumping stocks in Asia, weaker oil prices and a stronger yen against the US dollar.

The TOCOM rubber contract for May delivery finished 3.2 yen, or 1.9%, higher at 174.3 yen (US$1.56) per kg. It touched 174.8 yen earlier in the session, its highest since Sept 3.

"The TOCOM shrugged off weakness in most other commodities and share prices," said Jiong Gu, an analyst at Yutaka Shoji Co, citing an expected reduction in TOCOM-approved inventories next year and anticipation of measures such as export curbs to be taken by top producers.

Representatives from top rubber producers Thailand, Malaysia and Indonesia, which comprise the International Tripartite Rubber Council (ITRC), will meet before the year-end to finalise measures to improve the market, that would be implemented early in 2019, the Council said in a statement last week.

On the downside, Asian shares slid after the US Federal Reserve raised rates, as expected, and kept most of its guidance for additional hikes over the next two years, dashing investor hopes for a more dovish policy outlook.

Oil prices fell, erasing most of their gains from the day before, resuming declines seen earlier in the week amid worries about oversupply and the outlook for the global economy.

The yen advanced, changing hands at 112.38 against the dollar and poised for a fifth straight day of gains. In a widely-expected decision, the Bank of Japan kept rates steady, maintaining its ultra-loose monetary settings.

TOCOM's technically specified rubber (TSR) 20 futures contract for June delivery rose 0.6% to close at 148.4 yen per kg.

The most-active rubber contract on the Shanghai Futures Exchange for May delivery rose 140 yuan to finish at 11,490 yuan (US$1,666) per tonne.

The front-month rubber contract on Singapore's SICOM exchange for January delivery last traded at 127.2 US cents per kg, up 1.1 cent.

(US$1 = 111.8800 yen)

(US$1 = 6.8987 Chinese yuan)