‘Rain-guarding' lifts rubber output in May2010

‘Rain-guarding' lifts rubber output in May
Our Bureau

Kochi, June 3

The advent of good summer showers, early in the season, have resulted in increased rubber production in May.

In addition, high global and domestic prices have ensured that farmers maximised the yield from their plantations.

The high returns of the past several months have also resulted in more farmers ‘rain guarding' their trees, which has enabled them to tap the trees even during the rains – thereby increasing production, sources in the Rubber Board said.

Yield

Though the yield has declined across several individual holdings, this was neutralised by early resumption in tapping and increase in average tapped area on a month-on-month basis.

Production during the first two months of the current fiscal (April-May), was up three per cent at 1,08,100 tonnes.

While production in May increased less than two per cent, increased economic activity and demand from tyre and non-tyre sectors, led to consumption growing by close to 11 per cent.

Despite skyrocketing prices, there was all-round growth in demand and buying of natural rubber from both the tyre and non-tyre sectors, sources said. Most of the increased demand was met with available stocks .

Imports

The month also saw a sharp deceleration in imports, which fell by as much as 42 per cent. This was mainly because the international price of rubber sheets ruled higher than domestic prices for the better part of the month.

The Rubber Board has projected rubber imports to touch 70,000 tonnes this year. Rubber exports also firmed up during the month, as demand from China, for latex, buoyed up global prices and exporters exploited the price differentials between the domestic and international markets.

The Rubber Board has set a production target of 8,93,000 tonnes this year. However, consumption is slated higher, at 9,78,000 tonnes.

Available stocks

Much of the production-consumption mismatch is expected to be met from rubber stocks available within the country. However, rubber stocks which was estimated at 2,18,036 tonnes in May 2010, is expected to decline to 1,83,000 tonnes by the end of the current year.




Rising rubber prices could upset JK Tyre’s volumes-driven growth
Posted: 02 Jun 2010 06:38 PM PDT
Higher revenue on the back of increased volume and lower base helped the country’s third-largest tyre producer, JK Tyre, more than double its net profits to Rs 26 crore for the quarter ended March 2010 with a 22% increase in revenue. The company’s numbers are more or less similar to those it reported two years ago when the tyre sector was in fine shape.

The share price of JK Tyre touched Rs 235 in March, the highest level in a year, before shrinking by a third as investors have turned cautious due to the impact of relentless increase in rubber prices, which make up half of the cost for tyre producers. The change in operations has come from better volume growth that was up 11% to 56,700 metric tonne for the three months ended in March as compared to 51,000 metric tonne in the year-ago period. But operating margins have been impacted by increase in raw material costs.

Input costs as a percentage of revenues rose to 69% from about 57% in the year-ago period and the company recorded a 90 basis points (bps) decline in operating margin last quarter. To meet the rising costs, the firm has raised tyre prices by an average 5% across the segments over the past two quarters.

Price of rubber has more than doubled in the past one year and traded at Rs 169/kg as of June 1. This is expected to result in further pressure on product prices in the current quarter (April-June). But given that the increase in rubber prices and other raw materials is estimated at 30-40% and the tyre price increase is projected to be relatively modest, the company will continue to face margin pressure in coming months. The net profit, however, was partly boosted by moderation in interest and depreciation cost.

For the full year ended March 2010, the company had consolidated net profit of Rs 224 crore with topline of Rs 4,571 crore. The numbers are not comparable to the past year as the previous financial year stretched to 18 months. Mexican firm Tornel that JK Tyre acquired two years ago has increased net sales 10% for FY10.

The company is operating at full capacity in its Indian operations and expects the demand from the passenger tyre segment to grow 18% annually. The company plans to invest a total Rs 750 crore to raise capacities and has already invested Rs 315 crore last year.

Given this background, the outlook for the coming quarters looks bright as far as revenues are concerned. However, if rubber price continues to rise, margins would be under pressure in the forthcoming quarters.

(economictimes.indiatimes.com)





Rubber Prices in Thailand May Decline as Production Rebounds
Posted: 02 Jun 2010 06:34 PM PDT
By Supunnabul Suwannakij

June 2 (Bloomberg) -- Cash prices of natural rubber in Thailand, the world’s largest exporter of the commodity, may decline as production increases this month, according to the Thai Rubber Association.

Output may exceed 200,000 tons a month in June and July, up as much as 30 percent from a low-production period in April and May, the group’s President Luckchai Kittipol said. Output this year may be 3.2 million tons, matching that of 2009, he said.

Futures in Tokyo have tumbled 20 percent after reaching a 21-month high of 338.5 yen per kilogram ($3,704 a ton) on April 16 on concern Europe’s debt crisis may slow the global economic recovery. Manufacturing in China increased at a slower pace than expected last month, raising concern that demand from the largest rubber user may weaken.

“Rising output and worries over slow manufacturing growth in China will pressure the price,” said Luckchai. “Thai prices will gradually decline to a balanced level after overheating to a record this year,” he said, without providing a forecast.

Futures for November delivery, the most-active contract, declined as much as 15.7 yen to 266.5 yen per kilogram before settling at 269.2 yen on the Tokyo Commodity Exchange. Prices dropped to five-month low of 250.9 yen on May 17.

The free-on-board price of the benchmark Thai RSS-3 grade rubber for July-delivery, which excludes freight and insurance, declined 2.8 percent to 122.90 baht a kilogram today, the Rubber Institute of Thailand said. The price reached a record 130.55 baht on April 27.

High Thai prices have made supplies less competitive than those from rivals Indonesia and Malaysia, said Luckchai.

Supply Shortages

“We’re worried that demand for RSS-3 rubber may decline as prices are volatile and higher than they should have been,” he said. Domestic supply shortages are partly responsible for the high prices, he said.

Chinese buyers cancelled orders for less than 2,000 tons of RSS-3 rubber in May from Thailand, said Luckchai.

Still, “that amount is insignificant, compared with total exports to China of around 1.1 million tons a year,” he said. “It is unlikely we’ll see more product cancellation as prices have improved from the low level in May.”

Thai rubber exports this year may exceed the 2.8 million tons shipped in 2009 as the global economic recovery is expected to increase demand for tires from main buyers including China, Japan and Europe, he said.

(bloomberg.com)


Spot rubber improves on supply concerns
Our Correspondent

Kottayam, June 3

Spot rubber prices improved on Thursday. According to sources, the market regained strength mainly on supply concerns catalysed by a better closing in domestic futures on the National Multi Commodity Exchange.

Sheet rubber firmed up to Rs 168 (Rs 167) a kg while the market made all-round gains followed by fresh buying and short covering. The transactions were low. The June futures closed at Rs 168.14 (Rs 166.75), July at Rs 164.50 (Rs 163.43), August at Rs 158.32 (Rs 157.75) and September at Rs 154.25 (Rs 154.71) a kg for RSS 4 on the NMCE.

RSS 3 slipped with the June futures dropping to ¥364.7/Rs 183.56 (¥366.0) while the July futures improved to ¥354.4 (¥351.3), August to ¥327.9 (¥323.9) and September to ¥300.2 (¥296.8) a kg during the day session on the Tokyo Commodity Exchange.

RSS 3 (spot) moved down to Rs 176.46 (Rs 176.63) a kg at Bangkok.

Spot rubber rates (Rs/kg) were: RSS-4: 168 (167); RSS-5: 166 (164); ungraded: 163 (161); ISNR 20:152.50 (152) and latex 60 per cent: 111 (111).