Tokyo rubber futures could extend losses this week on persistent worries about demand from top consumer China, dealers said on Monday, while Thai raw sugar was being offered at discounts for the first time since 2009. Among other soft commodities, the cocoa market is waiting for the second-quarter grinding data, while coffee differentials could stay at last week’s levels amid volatile London futures.
The most active rubber contract on Tokyo Commodity Exchange, currently December, slipped to its lowest in nearly three weeks at 204.2 yen on weaker oil prices and high inventory in China. The contract rallied to its highest in two months at 220 yen a kg in late June, but has since struggled to sustain the gains.
“I would expect TOCOM to trade in a range of 195 to 205 this week. It’s very bearish. I think the market is overbought,” said an analyst in Tokyo. “So we expect to see long liquidation this week.” Tokyo futures, which set the tone for physical prices, have dropped about 25 percent so far this year.
While total rubber stocks in China’s bonded warehouses Qingdao have slipped to a five-month low, partly on reduced demand for the commodity as a loan collateral, the country still has nearly 150,000 tonnes of rubber in Shanghai. China is the world’s largest user of natural rubber, accounting for about 36 percent of global consumption. It imported 2.47 million tonnes of natural rubber in 2013.
In the sugar market, early indications showed that Thai high polarisation, or hipol, raw sugar stood at 50-55 points below New York futures following the expiry of the then July contract. The sweetener is now priced against October. “The main reason why Thai sugar is at discounts is because the July contract expired at a big premium to October,” said a dealer in Bangkok, referring to the calculations used to traders to determine the values. “Also, I guess supply is abundant.”
In the absence of leads, dealers turned their attention to a Thai tender for clues on demand for Thai sugar, which is competing with sweetener from top producer Brazil. Thai Cane and Sugar Corp (TCSC) will open a tender to sell 194,666 tonnes of raw sugar from the 2014/15 crop on July 8. The Thai 2014/15 sugar crushing season is expected to start in November and could run through April 2015. In the coffee market, Indonesian robustas may be offered at premiums of $30 to London futures, unchanged from last week, as volatile prices on Liffe curb trading.
On Friday, September Liffe futures traded down $12 at $2,056 per tonne, having hit a seven-week high of $2,085 on Thursday. Cocoa butter ratios are expected to stay at a 7-month high this week on tight supply. Dealers are waiting for the release of second quarter grinding data by the Malaysia Cocoa Board and the Cocoa Association of Asia in mid-July for clues on demand and inventory.