Global benchmark Tokyo rubber futures would be trapped in a tight range this week as a drop in inventory in the Shanghai market fails to shake off worries about demand from main consumer China, dealers said on Monday.
Among other soft commodities, Thai sugar premiums could be unchanged, coffee roasters are waiting for Indonesian robusta prices to weaken, while cocoa butter ratios are likely to stay in the current levels as chocolate makers seek a bargain.
The most active rubber contract on Tokyo Commodity Exchange, currently October, rallied more than 4 percent to a high of 208.4 yen a kg after Shanghai futures jumped almost five percent due to a drop in inventory.
But the Tokyo market, which sets the tone for tyre grade prices in Southeast Asia, has slipped about 25 percent this year on concerns over economic growth in China. The October contract was likely to trade in a range of 200 to 209 yen a kg this week.
“Maybe the price will still be supported at 200 yen. When the price gets over 209 yen, it may touch 220. But, it still needs strong news, such as bad weather,” said Gu Jiong, an analyst at Yutaka Shoji Co in Tokyo.
“Without that, it will be kept in a narrow range. Although Shanghai (inventory) is falling, there’s still plenty of stocks in Qingdao,” said Gu, referring to the bonded warehouses.
Inventories in warehouse monitored by the Shanghai Futures Exchange have slipped to their weakest since December to 163,097 tonnes (SNR-TOTAL-DW), but stocks in Qingdao are estimated to have increased to around 362,000 tonnes from around 360,000 tonnes last week and 290,000 tonnes in January.
Rubber in Qingdao was sold at discounts of more than 10 cents to prices in Southeast Asia.
Ample supply could also dictate Thai sugar premiums, where early indications showed the premiums for Thai high polarisation, or hipol, raw sugar were unchanged from last week at 25 points to New York futures for May/July delivery.
Thailand, the second-largest exporter after Brazil, produced a record crop in the just ended 2013/14 season.
“Premiums are low partly because demand is slow, although there are regular sales to Indonesia or Japan. China has been quiet for sometime,” said a dealer in Bangkok, referring to the world’s second-largest consumer after India.
In the coffee market, foreign buyers are hoping to buy Indonesian robustas at $30 to $50 below London futures as the crop harvest progresses in the main growing island of Sumatra, but recent deals have been struck at zero premiums.
Beans in rival Vietnam have been sold at $75 below futures.
The cocoa market could see butter ratios unchanged at 2.40 times London futures , under pressure from weakening prices in Europe.