Tokyo rubber futures plunge

Singapore (march 15, 2011) : rubber contracts on tokyo commodity exchange plunged on monday after a devastating earthquake struck japan late last week, prompting the exchange to halt trading and widened the trading band. fears that a sharp drop in physical prices could trigger a repeat of defaults of cancellations in shipments also spurred selling on tokyo futures, which have fallen more than 20 percent since striking a record at 535.7 yen a kg in february.
the most active rubber contract, currently august 2011, settled at 384.1 yen a kg, down 17.3 yen from friday's settlement at 401.4 yen. it had dropped as much as 7 percent. trading had been halted on monday morning after circuit breakers were hit and nearby contracts slumped on worries the quake could the economy and also on rumours some buyers had defaulted on shipment. "the earthquake will be the main reason but i think the rumours will be the catalyst. but people believe it's only rumour," said ker chung yang, investment analyst at phillip futures in singapore.
"i still tend to think the price may stay above 400 yen a kg. at the moment, it may be volatile. when everything settles, i think the demand will pick up soon. car production by toyota will also resume." demand from japan is expected to fall sharply as firms like toyota motor co, which suspended production until march 16, face problems with power supply and other infrastructure hurdles caused by the earthquake.
toyota motor co said on monday that it plans to suspend all production in japan at least until march 16 following friday's massive earthquake in north-eastern japan. tocom widened the trading ban for rubber futures to 50 yen a kg on monday after heavy losses following the earthquake. for rubber trading, a circuit breaker is triggered when prices swing more than 10 yen, suspending trading temporarily.
earlier this month when the market plunged sharply, it allowed prices to move as much as 40 yen up or down. china's benchmark rubber futures traded on the shanghai futures exchange fell by its daily limit on monday, tracking tocom. in the physical market, natural rubber prices dropped nearly 30 percent after reaching a record in february. benchmark thai rss3 was offered at $4.50 a kg, down from a lifetime high at $6.40 in february.
"so far we have no problems with major tyre makers but i heard rumours that china has defaulted on shipments. that is kind of on the cards, although our group, to date, is unaffected," said a dealer in singapore. thailand's government said it would intervene in the domestic rubber market to support prices, which fell sharply on monday following last week's earthquake in japan where many manufactures have suspended production, accentuating a plunge over the past month.
the cash price for unsmoked sheet (uss3) has almost halved from the record high of 180 baht per kg hit in mid-february. it was quoted at 95 baht per kg on monday, reflecting fears that demand would fall after the devastating earthquake and tsunami.