Japan’s Rubber Futures Fall on EV Concerns

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Rubber Futures Decline Amid Multiple Factors: Japanese rubber futures experienced a notable decline as various factors converged to impact the market significantly.

Impact of Increased Inventories: The Osaka Exchange (OSE) rubber contract for July delivery witnessed a drop of 1.64%, closing at 282.0 yen per kg. This decline is attributed to a 1.9% rise in rubber inventories in warehouses monitored by the Shanghai Futures Exchange, marking the ninth consecutive week of increase.

Tire Production Slowdown in Key Regions: Reports indicate that some tire manufacturers in Shandong’s Dongying and Weifang regions plan to conclude productions by end-January, aligning with the upcoming holiday period. Shandong, a crucial hub for tire manufacturing in China, contributes to the overall slowdown in rubber demand.

Concerns Over Electric Vehicle (EV) Demand: Pessimism surrounding electric vehicle demand further impacted rubber futures. U.S. new vehicle sales are projected to decrease by 1.5% in January year-on-year, driven by seasonally slower sales and signs of cooling demand for electric vehicles, as indicated by industry consultants J.D. Power and GlobalData.

Global Economic Factors and Oil Price Surge: The global EV market’s deceleration, as projected by South Korean battery maker LG Energy Solution, and Bank of America Global Research’s downward revision of EV sales and market share forecasts, added to the overall market concerns. Meanwhile, the surge in oil prices due to fuel supply worries following a missile strike in the Red Sea also played a role.

Market Response and Asian Stock Trends: Despite these challenges, Asian stocks rallied at the beginning of the week. Chinese regulatory measures aimed at stabilizing the local market managed to outweigh concerns related to the liquidation of China Evergrande. Japan’s benchmark Nikkei average closed up 0.77%, showcasing resilience amid global market fluctuations.

Currency and Other Market Indicators: The Japanese yen strengthened by 0.22% against the dollar, indicating shifts in currency dynamics. Additionally, the front-month rubber contract on Singapore Exchange’s SICOM platform for February delivery registered a 0.72% decline, reflecting broader market trends.

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