China economy concerns hurt rubber

Tuesday, 29 April 2014 00:00 - - {{hitsCtrl.values.hits}}

SINGAPORE (Reuters): Concerns about the state of Chinese economy will overshadow the impact of tight supply on rubber prices this week, with the benchmark Tokyo futures contract likely to trade near its lowest in more than four years, dealers said on Monday. Among other soft commodities, robusta coffee supply could pick up in Indonesia as the main crop progresses and Thai sugar premiums could be stuck in the current ranges, while cocoa grinders chase buyers after Easter sales.

The most active October rubber contract on the Tokyo Commodity Exchange settled 4.1 yen a kg higher at 206.3 yen to track gains in oil, but prices were still within sight of a 4-1/2-year low of 196.7 hit last week. The contract has plunged 25% this year. “There are so many supportive factors but prices are still going down. So I guess the market is very much influenced by the slowdown in the Chinese economy,” said Vanessa Tan, an investment analyst at Phillip Futures in Singapore. “There has been conflicting economic data on China. There’s no consensus yet whether the economy is recovering well. A slowdown in China will affect demand for rubber,” said Tan, who pegged resistance at 215 yen and support at 190 yen. Worries about rubber demand from top consumer China offset the impact of tight supply in Thailand, Indonesia and Malaysia during the wintering season. Tyre-grade prices could not resist pressure from Tokyo futures, whose movements are often influenced by macroeconomics, currencies, equities and politics. A drop in rubber inventories in warehouses monitored by the Shanghai Futures Exchange has also failed to offer support. In the sugar market, Thai raw premiums may stay at last week’s levels of 75 to 80 points to New York futures, but potential buyers are likely to wait for bargains because of ample supply. Early indications showed that Indonesian robusta premiums were little changed from last week’s levels of $20 to $30 a tonne to London futures, much more expensive than Vietnamese robustas, which were offered at $80 below futures. Indonesia and Vietnam, which compete in the robusta market, together account for about 27% of global coffee output. Indonesian robusta supplies are already rolling in as the harvest has started, and the beans could be sold at discounts when the harvest peaks in the middle of this year. Indonesia’s total coffee output is forecast at 11.667 million 60-kg bags in the 2013/14 crop year, down from 12.730 million bags in 2012/13, according to the International Coffee Organization. In the cocoa market, grinders are still waiting for chocolate makers to return after buying butter to meet Easter demand. Butter ratios were unchanged at 2.40 times London futures.