Osaka Mercantile Exchange Rubber Futures Monthly Report

On July 1, nearby RSS3 futures months attracted short-covering on the rumour that the Chinese government would issue the rubber import quotas for 80,000 tonnes, and the market opened higher (spot month: \69.70 distant month: \79.40). Amid INRO's abeyance from intervention due to the shortage of funds, RSS1 in Singapore Commodity Exchange fell below the 100 Singapore cents/kg despite the Thai government's efforts to raise the rubber prices. On July 8, with this factor, spot and distant months sank to the all time lows at \62.00 and 72.50 respectively. On July 9, the prices rebounded (spot month: \64.10 distant month: \74.70) on short-covering as players grew cautious of the lower level after a round of distressed selling. On July 13, the market turned lower (spot month: \64.10 distant month: \74.70) on renewed selling after buying for profit taking. There were some bearish factors in the market, such as the sluggish demand in the major rubber consuming countries, the rise in warehouses stocks in Japan to 46,000 tonnes, 14,000 tonnes out of which is in Kobe area, and a large quantity of applications (880 lots) for quality inspection. On July 19, the prices declined (spot month: \59.90 distant month: \69.20) on active stop-loss selling. Later, some encouraging news appeared, such as the Thai government approving further fresh funds worth 4.0 billion baht for the current intervention to be extended to the end of 1999, China's State Planning and Development Commission opening quotas for the import of 190,000 tonnes of rubber and some Chinese traders inquiring for large quantities. On July 22, with theses factors, the prices trended upward (spot month: \61.40 distant month: \70.50) on short covering for profit taking. On July 26, spot month expired lower at \59.30, the lowest expiry since its inception. Deliveries swelled to 880 lots due to this low price at the expiry. Players supposed that the ample supply would continue due to the poor seasonal demand. On July 29, distant month plunged to its all time low at \66.00 on distressed selling due to the yen's further gain and to the continued price-falls in Singapore Commodity Exchange. On July 1, rubber index futures prices were mostly unchanged at the open (spot month: \66.55, distant month: \73.40) with players staying on the sidelines in the absence of fresh incentives. Later, the news that the Chinese government would issue the rubber import quotas to users for 100,000 tonnes seemed to give little impact on the market. On July 7, distant month sank to the day's limit-low at 68.00 in line with the sharp fall in the prices in Singapore Commodity Exchange. On July 13, the new December contract month opened at 68.50. This was higher than the November contract, which opened at 67.50. On July 14, amid the firmer yen, distant four months fell to the daily limit-lows on hurried long-liquidation and bears selling prompted by spot and distant months in RSS3 futures market hitting all time lows. Later, the prices resisted to decline further on buying for profit taking. On July 19, distant month dropped to 65.95 on renewed selling due to the stagnant tone in RSS3 futures market. On July 22, distant month steadied to 68.40 on the news of reinforcement of the Thai government's intervention. Later, all contract months except spot month sank to the May's limit-lows for two consecutive days on active selling following the price-falls in RSS3 futures due to a glut of rubber stocks and to the yen's strength. On July 30, distant month plunged to all time low at 62.75 since the opening of index futures market in response to the easier tone in the producing countries. Throughout the month, amid ample supplies, public investors continued to square their positions as the prices in the producing countries trended downward despite their efforts to raise the rubber prices. The open interest in both rubber index futures and RSS3 futures markets continued to decrease, and the open interest of rubber index futures as of July 30 fell to 32,134 lots, down about 6,000 lots from the previous month.