* April contract open interest down 86.5 pct since end-March
* TOCOM-approved warehouse stocks at lowest since July 2010
* Still risk of price volatility as expiration approaches
By Yuka Obayashi
TOKYO, April 17 Tokyo Commodity Exchange (TOCOM)
has urged any investors with open positions in April rubber
futures to settle contracts well before expiration on April 24,
with exchange inventories sitting at a level low enough to pose
a risk of sudden price swings.
Natural rubber stocks at TOCOM-approved warehouses have
slipped to their lowest in more than six years after Thai floods
in January cut output and as higher prices in China lured
supplies out of Japan.
"We have called attention to our member brokers since late
last month to encourage investors with no intention to take or
make physical delivery to swiftly make balance settlement on the
April contract if they still hold any positions," said TOCOM
spokeswoman Sayaka Sato.
Spurred in part by TOCOM's prompting, April open interest -
the number of positions still to be closed out - had shrunk to
144 lots by the close of business last Friday from as many as
1,066 lots as of March 31. Each lot is equal to 5 tonnes of
TOCOM's spokeswoman said it was standard procedure to usher
investors out of expiring contracts, but some brokers said it
was a rare move that revealed concerns about a potential price
An official at one commodity brokerage, speaking on
condition of anonymity as he was not authorised to discuss the
matter publicly, said TOCOM's call on investors holding the
April contract to make early settlements was "an unusual step".
The action helped boost the price of the contract by
as much as 15 percent in early April from end-March, although
the price has since come down.
As of the latest stocks report, rubber inventories at TOCOM
warehouses JRU-WRHSTX-TOT as of March 31 stood at 1,461
tonnes, down nearly four-fifths from a year earlier and the
lowest since July 2010, reflecting the reduced Thai supply and
the outflow of inventory to China.
That was the equivalent of 292 lots, well below the 1,066
lots of April open interest at the time.
With April open interest having dropped by 86.5 percent
since then to the equivalent of 720 tonnes of supplies, the risk
of warehouse supplies falling short of potential demand has
Yet there is still a risk of price volatility as expiration
approaches and traders adjust remaining positions tied to April
delivery, industry sources warned. The February and March
contracts both saw sharp price swings just ahead of expiration.
"Unless open interest drops below 100 lots, you can't say
risk for investors missing delivery of physical supplies or
price volatility has gone," said an official at another broker,
who declined to be named as he wasn't authorised to speak to
(Reporting by Yuka Obayashi; Editing by Kenneth Maxwell)