TOCOM futures plunged to a one-and-a-half-month low on Tuesday. The market recovered some of its losses as foreign funds stepped up unwinding long positions and end-users began buying. The benchmark contract for December delivery finished lower by 4.2 yen, or 2.2%, at 185.4 yen. The quick unwinding of overseas funds triggered the TOCOM’s drop. However, the market remains highly volatile and may have further losses ahead.
Tokyo Commodity Exchange (TOCOM)
Tokyo rubber futures set the tone for tire rubber prices across Southeast Asia. The Tokyo Commodity Exchange (TOCOM) closed at 196.7 yen per kilogram, close to two-month lows. Earlier this month, the US dollar returned to 110 yen. The company hopes to cross-list its futures on the Shanghai Commodity Exchange and list it as a derivative. While the merger is still far from being final, the two companies hope the deal will help push the prices of tire rubber higher.
As the Asian market catches up to the demand for Japanese-grown rubber, TOCOM stocks are at their lowest level in more than six years. Several factors have led to the decline in supply. The Thai floods cut down on production and increased prices in China diverting supply. Traders are concerned that the dwindling supply may squeeze prices for near-term contracts. Recent trading volumes have seen a premium over later-dated contracts.
TSR has been a key component of tire manufacturing, and its consumption has outpaced RSS in recent years. The listing is expected to improve the trading conditions for Japanese and Chinese manufacturers. TOCOM’s spokesman said he expects an increase in trading volume and convenience for Japanese and Chinese consumers. Tom has already listed a futures contract in TSR on the Singapore Exchange, which trades US dollar-based contracts. These are a sign that Tom expects the listing to boost volumes and ease the trade in its underlying rubber products.
The TOCOM rubber market has seen its share of dips and volatility in recent years. Despite its stability, the Tocom market has been hit again in the fall, following an upgrade by the Tocom exchange. This made multiple orders more difficult. The market is now at its lowest level since 2011 and the benchmark price of a rubber futures contract has dropped 56%. It remains a strong contender for growth as a source of raw material. There are a variety of other benefits associated with the exchange’s global market.
Natural to come rubber prices rose this week as they rose to a two-month high on the Tokyo Commodity Exchange (TOCOM). Despite the looming monsoon rains, the price of this raw material climbed by 12 percent in June. A slowdown in the automobile industry in China also hurt demand. However, a lack of supply in the global market is expected to keep prices stable. China currently accounts for more than 40 percent of natural rubber demand, which boosted prices.
The news is particularly relevant for Japanese tire makers, as TSR is an essential component in the manufacture of tires. In fact, consumption of TSR has surpassed that of RSS in recent years. The company hopes that listing the raw material will boost the rubber market. A TOCOM spokesman said the listing of TSR on the bourse would increase the volume of rubber trading and provide more convenience for Chinese and Japanese buyers. While the emergence of the TSR futures market is welcome news for rubber producers, it’s not necessarily a good sign for the industry.
Deals and shares with Tom
Sicom’s deal with Tom could be a positive development for Tom’s rubber prices. It is an attractive option for both sides, given that the agribusiness sector has seen its share of the rubber market shrink in recent years. The heightened price of TSR in recent years has caused some small and mid-sized manufacturers to switch to RSS. However, this hasn’t prevented the prices of RSS to fall. Despite the recent drop in TSR prices, the company has been steadily boosting its production levels.
TOCOM Rubber is a global benchmark for rubber prices. The company produces this type of natural rubber and sells it at a fair market value. TOCOM rubber is also widely used in many manufacturing processes. Its production and consumption are regulated by a strict set of rules. TOCOM is one of the world’s largest commodity futures exchanges, operating nine days a week with two trading sessions each day. It has become a leading commodity exchange in Asia.
The government of Thailand, Malaysia, and Indonesia has recently launched a new trading platform for the commodity rubber. The aim of the exchange is to raise the price of raw rubber and help farmers in these countries earn a better income. To attract more Chinese firms, Tom is ramping up its marketing campaign in China. Its Hong Kong subsidiary will help Chinese traders trade outside of China. In addition, it has strengthened ties with leading Chinese brokers, and some are starting to trade through remote members.
In the past three years, the Tom market has stabilized. However, this fall, the market again took a hit. This was after the exchange upgraded its systems and made it more difficult for users to place multiple orders. This has reduced the trading volume, resulting in a price slump for rubber. Historically, prices of benchmark rubber futures contracts have dropped 56% since 2011.
Foreign brokerage firms can also join the TOCOM trading platform. They can do so on behalf of their customers and may trade on their own accounts. However, a business location in Japan is not required to access Tom markets. They must, however, designate a clearing broker, in order to be able to conduct business in Japan. This way, they can benefit from the exchange’s expertise in the trading of rubber. Tom also offers the option of becoming a member of its board.
Tom is the world’s largest commodity futures exchange, with a trading volume of over 27.2 million contracts in 2013. The company became a for-profit shareholder-owned firm in 2008, and the current trading platform was launched in 2009. In the same year, the TOCOM also introduced a night session and a new option in the market: a reformulated price for Tom rubber. Tom has been offering RSS rubber contracts for nearly 66 years, and now plans to double the number of these contracts.
The Tom rubber market has experienced its share of turmoil over the past few years. After a brief period of stability, the market was once again hit hard this fall after the Tom exchange upgraded its systems, making it more difficult to make multiple orders. Since 2011, trading volumes in the Tom rubber futures contract have fallen sharply, with the benchmark price of the contract falling by 56% in 2011.
The price of TOCOM futures plunged to a one-and-a-half-month low on Tuesday, but buying from end-users and foreign funds helped the market recover some losses. The benchmark TOCOM rubber contract for December delivery finished down 4.2 yen, or 2.2%, at 185.4 yen, the lowest since May 15. The market’s rapid plunge was triggered by the quick unwinding of long positions by overseas funds.
Impact of Volatile Markets
TSR trading volumes have declined in recent years, as local investors have focused on volatile markets, and Japanese manufacturers have resisted using commodity futures for hedging. Now, however, the market is poised to open to Japanese speculators and hedgers. Its current US dollar-based futures on Tocom rubber are outperforming those on the Singapore Exchange. But the market remains small. If the market continues to grow as expected, it will be hard to keep TSR’s share of trading volume high.
The Tokyo Commodity Exchange, Inc. is Japan’s largest commodity futures exchange. Its 98% market share makes it one of the most prominent exchanges in Asia. The Tokyo Commodity Exchange trades raw materials and primary goods, as well as a wide variety of other industrial products. The TCE was founded in 1984 following the merger of three Japanese exchanges. With two trading sessions a day, it is Japan’s largest commodity futures exchange.
The rubber market is poised to rise when June 24 approaches, but supplies are not expected to increase much until July. A Japanese commodity brokerage manager said rubber markets are influenced by more bearish views in other sectors. The key TOCOM contract is expected to hit technical support soon at around 260 yen a kg. Despite the weak demand for the commodity, the market looks set to remain firm. In addition, the market has been hit by the rising price of crude oil futures.
The benchmark TOCOM contract for January delivery fell on Thursday after touching a one-month low. However, the contract was on track for a rebound overnight in Shanghai and ended 0.7 percent higher on Thursday. Earlier in the session, the contract hit a high of 285.3 yen a kilogram, up from a low of 281 yen the previous day. After a four-day holiday, TOCOM rubber futures were down about 1.9 percent on Wednesday.