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Japanese rubber futures close at 7-year high on weather woes

Japanese rubber futures climbed on Friday to close at a seven-year high, as lingering weather concerns, optimism around strong Chinese automotive data, and higher oil prices helped the contract post a 4% weekly gain.

Japanese rubber futures close at 7-year high on weather woes

The Osaka Exchange (OSE) rubber contract for August delivery closed up 13 yen, or 4.33%, at 313 yen ($2.12) per kg, the highest close since Feb. 17, 2017. The contract ended higher for a fourth consecutive session and logged a weekly gain of 4.06%.

The rubber contract on the Shanghai Futures Exchange (SHFE) for May delivery climbed 445 yuan to finish at 14,250 yuan ($1,982.06) per metric ton. Top producer Thailand’s meteorological agency has warned of severe weather conditions in upper Thailand from March 8-10, potentially causing crop damage.

Due to hot weather conditions in Thailand, some processors are expecting wintering to end later by end May or June, said Farah Miller, CEO of Helixtap Technologies, an independent rubber-focused data company.

Market participants are also looking for more China consumption before further price moves up, Miller added. China’s export and import growth in the January-February period beat forecasts, suggesting global trade is turning a corner. China’s passenger vehicle sales rose 16.3% over January-February from the same period a year earlier, data from the China Passenger Car Association showed on Friday. Oil prices rose on Friday, driven by growing demand in the the United States and China.

Natural rubber often takes direction from oil prices as it competes for market share with synthetic rubber, which is made from crude oil. Japan’s benchmark Nikkei average closed 0.23% higher. Big Japanese companies look set to formally offer hefty pay hikes at annual wage talks with unions that wrap up on March 13. The front-month rubber contract on Singapore Exchange’s SICOM platform for April delivery last traded at 163.5 US cents per kg, up 2.77%.

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