[12 Feb] Asian Rubber Settles Higher On Strong China Demand, Crude

Asian rubber futures settled higher Thursday amid fresh buying and short covering as investor sentiment was bolstered by China, where automobile sales and rubber imports surged in January, and on strong crude oil.

Japan's Tokyo Commodity Exchange was closed for a public holiday, but prices rose sharply in neighboring China.

Natural rubber futures on the Shanghai Futures Exchange surged 3.8% or CNY885 to settle at CNY23,665/ton on expectations that demand may rise further due to more requirement of tires for new automobiles.

The market stayed above CNY23,000/ton throughout the day's trading and even rose to an intraday high of CNY23,955/ton.

"There are also some worries about the weather in (rubber-producing countries of) Southeast Asia, which might cut into output," said Orient Securities Futures analyst Lin Hui.

The wintering season has started in the highlands of Thailand, translating into dwindling supplies of raw material in the country's three central markets.

Daily arrivals in the three central markets total less than 100 tons, and most factories pay a premium to get their raw material in private deals outside the markets.

However, the rise in prices wasn't as sharp in Thailand, the world's largest natural rubber producer, as in China.

The benchmark September contract on the Agricultural Futures Exchange of Thailand settled THB1.75 higher at THB102.85/kg.

Trading was thin as buyers are unsure whether the gains in Shanghai can be sustained just before the Lunar New Year holidays.

A rebound in other commodities such as crude oil also boosted investor sentiment, said a Thailand-based trader.

Nymex light, sweet crude for March delivery settled 77 cents or 1% higher yesterday at $74.52/bbl after hitting a one-week high of $74.97.

Physical rubber prices continue to rise as demand exceeds supply.

This is a seasonal phenomenon, said a Bangkok-based rubber industry official.

"As long as consumers have strong purchasing power, there will be buyers for rubber, even at these high prices," he noted.