SINGAPORE (Sept 10): Shanghai rubber futures tumbled to their weakest level on record on Wednesday and prices in Tokyo sank to a five-year low, as concerns about oversupply and weak demand from top consumer China sparked heavy selling from speculators.
The selloff pressured the TSR contract on Singapore's SICOM that fell to its lowest since 2009, prompting tyre grade sellers in Thailand, Indonesia and Malaysia to retreat.
The most active contract in Shanghai hit an all-time low of 13,365 yuan ($2,180) a tonne.
The benchmark contract on Tokyo Commodity Exchange, which often influences Shanghai, fell to 187 yen ($1.76) per kg - its weakest since 2009.
Both Shanghai and Tokyo futures have plunged more than 31 percent so far this year, hurt by worries about China's economy and recently by Thailand's decision to sell the country's 200,000-tonne rubber stockpile.
"Concerns over demand and supply are still there. Although stocks in Qingdao have fallen a lot, they are still above 200,000 tonnes," said a dealer in Tokyo, referring to the inventory in China's bonded warehouses.
"You may want to take short positions but at the current price, it's risky. Key support in Tokyo is 185 and resistance at 200."
Dealers estimated the closely-watched stocks in Qingdao had dropped to 217,400 tonnes from about 290,000 tonnes in January. The port has been at the centre of a major investigation into an alleged commodity financing fraud.
China's economy has had a bumpy ride this year. Although growth rebounded slightly in the second quarter from an 18-month low due to a stream of government stimulus measures, hopes the recovery would gain traction were dashed in July when data showed activity was fizzling again.
"There's panic selling. There's so much rubber," said another dealer in Tokyo. "Demand from China is also a concern. I would say 180 yen will be the support level this week, while 190 yen will be upside."
In Singapore's SICOM market, the front-month contract tumbled to a low of 150.10 cents a kg. The TSR contract covers Thai STR20, Malaysian SMR20 and Indonesian SIR20 grades.
"Everybody is having a headache. We are losing money because of the falling prices," said a physical dealer in Indonesia. "I don't hear of any deals last night. Nobody wants to sell."