Natural rubber futures hit new highs as supply risks mount due to adverse weather in Southeast Asia and flooding in Thailand. Trading has been thin due to the holiday period in the Shanghai market.
OSE natural rubber futures for the benchmark contract month remained in the ¥450-per-kg range, reaching ¥458.50 on 7 October and setting a new year-to-date high for the third consecutive week. Trading has remained generally thin, with position adjustments continuing, partly due to the Shanghai market entering the National Day holiday period.
Adverse weather in Thailand and other major producing regions has also been attributed to the effects of El Niño, and continued heavy and torrential rain is disrupting natural rubber supply conditions. Flood damage is spreading in Thailand, with more than 1.48 million households and 4.19 million people affected as of 7 October.
The flooding has also dealt a blow to Thailand's automotive industry, with production stoppages at factories reported. The market is increasingly pricing in both supply and demand shocks, and conditions remain such that price movements are prone to become volatile.
The market is in contango, with buying prevailing mainly in deferred contracts, although prices have not risen sharply under the leadership of the nearby contract. The outlook being reported is that movements in crude oil and USD/JPY are expected to have only a limited impact.