Commodity prices increase despite mixed economic signals

Commodity prices rose across the board on China’s futures exchanges on Monday, despite a mix of macro-economic signals, including rising stock markets and weak manufacturing data.

Prices of all of the most heavily-traded futures contracts increased, with natural rubber for January delivery up the most. The contract jumped 3.5 percent to settle at 33,090 yuan ($5,119) per ton on the Shanghai Futures Exchange.

Natural rubber prices have risen on the back of last week’s spike in crude oil prices, which pushed up the price of synthetic rubber, said Tong Changzheng, an analyst for Huatai Great Wall Futures. As synthetic rubber prices rise, demand for natural rubber increases, along with prices.

About 65 percent of the world’s natural rubber is used to make auto tires.

Tong also attributed the market’s bullish attitude toward rubber to a June 30 meeting of the State Council, China’s cabinet, which promised support for the country’s auto industry. “So the market thinks that auto industry’s current weakness might change in the future,” he told the Global Times.

The rise in China was independent of international markets. The international benchmark natural rubber contract on the Tokyo Commodity Exchange was down 0.7 percent on Monday at 375.3 yen per kilogram ($4,650 per ton).

Petrochemicals performed well on Monday, even though there was no significant increase in crude oil prices since Friday evening. The benchmark West Texas Intermediate crude oil was trading nearly even with Friday’s opening price when China’s markets closed on Monday.

Linear Low Density Polyethylene (LLDPE) for September delivery rose 3.2 percent to settle at 10,965 yuan per ton on the Dalian Commodity Exchange. LLDPE is a raw material used to make plastic wrap.

“The main reason is that the upstream producers rose prices,” said Li Zhoulei, an analyst with Shanghai Cifco Futures.

Source: Global Times

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