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Japanese Rubber Futures Decline From Lower Prices and Market Pressures

April 24, 2024

24th April 2024

Japanese rubber futures on the Osaka Exchange (OSE) for October delivery experienced a downturn, falling by 5.1 yen or 1.65% to 304.2 yen ($1.97) per kg as of 0208 GMT. Similarly, the rubber contract for September delivery on the Shanghai Futures Exchange (SHFE) decreased by 155 yuan or 1.08% to 14,215 yuan ($1,962.26) per metric ton. These movements are in tandem with the dip in physical rubber prices in Thailand, where the benchmark export-grade smoked rubber sheet (RSS3) was quoted at 83.67 baht per kg, marking a 0.96% decrease from the previous day.

Impact of Lower Physical Rubber Prices

The decline in physical rubber prices in Thailand, a major producer, is exerting downward pressure on futures prices. This trend is reflected in the global pricing mechanisms, influencing trading strategies and sentiment across major rubber trading hubs in Asia.

Electric Vehicle Sector Challenges

Contributing to the bearish sentiment in the rubber market is the intensified price war among automakers of electric cars and plug-ins in China, anticipated due to an oversupply. China’s state planner has flagged this issue, noting that the competition could lead to significant pricing strategies among leading manufacturers, which may indirectly affect rubber demand as it is a key component in vehicle production.

Broader Market and Economic Indicators

Despite the declines in rubber futures, Japan’s benchmark Nikkei average showed positive movement, rising 2.01% as of 0128 GMT. This divergence highlights varying investor sentiments across different sectors of the economy. Additionally, the yen remains near a 34-year low against the U.S. dollar, with Japanese officials intensifying warnings about potential interventions. This situation underscores ongoing economic challenges, including inflation concerns exacerbated by weak exchange rates, as noted in a joint statement with the U.S. and South Korea.

Corporate Developments and Market Strategy

In corporate news, Tesla’s recent announcement about introducing “new models” by early 2025 using existing platforms and production lines, rather than pursuing more ambitious, costly new model plans, reflects strategic shifts that could influence market dynamics in related sectors, including rubber.

Current State of Rubber Trading on Other Platforms

On the Singapore Exchange’s SICOM platform, the front-month rubber contract for May delivery remained unchanged, trading flat at 160.7 U.S. cents per kg. This stability contrasts with the declines observed in the Japanese and Chinese markets, suggesting localized factors influencing market behaviors differently across regions.

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