Spot rubber rules steady

Spot rubber rules steady


Kottayam, June 17

Physical rubber prices closed steady on Thursday. The market activities almost hit the bottom line as the traders were mostly reluctant to enlarge their commitments. Sharp declines in the Japanese markets kept the sentiments under pressure on early trades but sheet rubber ended flat at Rs 169 a kg amidst extremely thin volumes.

Futures recover

In futures, the July series recovered to Rs 168.52 (166.00), August to Rs 164.25 (160.95), September to Rs 159.93 (156.75) and October to Rs 156.55 (154.97) a kg for RSS 4 on the National Multi Commodity Exchange. RSS 3 declined with the June futures slipping to ¥353.5/Rs 179.08 (¥361.4), July to ¥342.6 (¥350.5), August to ¥322.6 (¥330.6), September to ¥301.2 (¥309.2), October to ¥281.9 (¥291.1) and November to ¥275.3 (¥285.7) a kg during the day session on the Tokyo Commodity Exchange. RSS 3 (spot) slipped to Rs 168.20 (168.77) a kg at Bangkok.

Spot rates were (Rs/kg): RSS-4: 169.50 (169.50); RSS-5: 167 (167); ungraded: 166 (165); ISNR 20: 150.50 (150.50) and latex 60 per cent: 120 (120).


Rubber Declines for First Day in Six on U.S. Data, Higher Yen
Posted: 16 Jun 2010 11:44 PM PDT
By Aya Takada

June 17 (Bloomberg) -- Rubber declined for the first time in six days as a drop in U.S. housing starts raised concerns that the economic recovery may slow and a stronger Japanese currency reduced the appeal of yen-denominated contracts.

Futures in Tokyo retreated after reaching a two-week high yesterday. Asian equities decreased after a U.S. Commerce Department report showed housing starts slumped 10 percent in May, the biggest drop since March 2009.

The yen advanced amid concern that Europe’s debt crisis will impair the region’s economic recovery, boosting demand for Japan’s currency as a refuge. Crude oil dropped from a six-week high, weakening the appeal of natural rubber as an alternative to synthetic products used to produce tires.

“Uncertainty about the economic outlook sapped investor interest in the commodity,” Shuji Sugata, research manager at Mitsubishi Corp. Futures Ltd. in Tokyo, said by phone.

November-delivery rubber lost as much as 2.4 percent to 278.9 yen a kilogram ($3,056 a metric ton) before trading at 280.8 yen on the Tokyo Commodity Exchange at 11:55 a.m. local time. The price reached 286.7 yen yesterday, the highest level since June 1, after a report showed New York-area manufacturing expanded for an 11th month.

Rubber futures dropped to a three-week low of 253.6 yen on June 9 amid expectations that supply from Thailand, the world’s largest producer and exporter, will increase seasonally.

“Output in Thailand has been growing, leading to increased shipments by Thai exporters,” Sugata said.

Market ‘Uncertainty’

The free-on-board price of RSS-3 grade for July delivery reached 115.1 baht ($3.55) a kilogram on June 15, according to the Rubber Institute of Thailand. It retreated from a record high at 130.55 baht on April 27.

Japanese equities slid for the first time in six days after FedEx Corp. projected lower-than-estimated earnings and the government report showed U.S. housing starts dropped.

“Uncertainty over the market outlook and a loss of confidence have driven down the market,” said Mitsushige Akino at Tokyo-based Ichiyoshi Investment Management Co.

The yen strengthened against all 16 major counterparts on speculation European Union leaders will discuss ways to tighten financial-market regulation. The euro fell for a second day versus the dollar after Spain’s central bank said it plans to publish the results of stress tests carried out on the nation’s lenders in order to quell speculation that it needs international aid.

November-delivery rubber on the Shanghai Futures Exchange lost 2.9 percent to 21,455 yuan ($3,141) a ton at 10:34 a.m. local time. The market resumed trade today after a three-day public holiday.

(bloomberg.com)





Malaysia Rubber Output May Jump as Tapping Rise Offsets Drought
Posted: 16 Jun 2010 07:46 PM PDT
June 17 (Bloomberg) -- Natural rubber output in Malaysia, the world’s third-largest grower, may surge 17 percent this year as rising prices prompt farmers to increase tapping, offsetting crop damage from drought, the Malaysian Rubber Board said.

“Drought has had an impact on production but overall output will increase because of price,” Salmiah Ahmad, director general of the board, said in an interview.

Production this year may climb to as much as 1 million metric tons, said Salmiah. That is more than the 900,000 tons forecast by the nation’s Plantation Industries and Commodities Ministry in May. Output last year was 856,189 tons.

Rubber futures in Tokyo have rallied about 12 percent from a five-month low on May 17 on optimism that economic expansion in Asia and record auto production in China, the biggest vehicle market, will drive demand for the commodity used in tires.

Improving demand will likely support prices at “around the current figure,” Salmiah said, without giving an estimate.

Rubber has climbed 73 percent on the Tokyo Commodity Exchange in the past year and reached a 21-month high of 338.5 yen a kilogram ($3,706 a ton) on April 16 on a seasonal drop in supply from top growers. The contract for November delivery, the most-active, dropped 2.1 percent to 279.7 yen at 11:10a.m. in Tokyo, snapping a five-day, 9.8 percent winning streak.

Prices in Malaysia have already “touched bottom and are expected to move up again,” said Salmiah. The average price for benchmark Malaysian SMR 20 grade rubber this year is expected to be about 9 ringgit ($2.75) a kilo, she said. The price has averaged 9.95 ringgit so far this year, according to data on Malaysian Rubber Board’s website.

China Factor

Malaysia’s natural rubber exports may surge 28 percent this year to 900,000 tons, said Salmiah.

“Demand for Malaysian rubber is expected to remain strong,” she said. “Although the European crisis may weaken demand, the China factor is stronger than the Europe factor.” Consumption in China, which accounts for 40 percent of Malaysia’s exports, is growing at about 10 percent a year, she said. Europe buys about 13 percent.

China’s automobile output this year may grow by as much as 15 percent, expanding from a record to 15 million units, Gu Xianghua, deputy general secretary of the China Association of Automobile Manufacturers, said May 29.

The country’s vehicle sales surged 46 percent to 13.6 million units last year, overtaking the U.S. as the world’s biggest auto market.

(bloomberg.com)





Rubber Climbs to 2-Week High as U.S. Data Boosts Demand Outlook
Posted: 16 Jun 2010 06:42 PM PDT
By Aya Takada

June 16 (Bloomberg) -- Rubber climbed to a two-week high after growth in New York manufacturing boosted expectations that demand will increase for the commodity used to make tires.

Futures in Tokyo advanced for a fifth day and reached the highest level since June 1. The price has gained 3.5 percent this year amid speculation that Europe’s sovereign-debt crisis may not stall global economic recovery.

Equities and commodities rallied after reports showed New York-area manufacturing expanded for an 11th month. The MSCI Asia Pacific Index gained for a fifth day after having fallen 11 percent from a 52-week high on April 15 on concern that mounting government deficits will deter some European nations from shoring up their economies through spending.

“Investor attention has shifted to the strength of the U.S. and Chinese economies from the European debt problems,” Kazuhiko Saito, an analyst at Tokyo-based broker Fujitomi Co., said today by phone. “Rubber chased a rally in equities and energy markets.”

November-delivery rubber gained as much as 3.1 percent to 286.7 yen a kilogram ($3,125 a metric ton) before settling at 285.7 yen on the Tokyo Commodity Exchange.

All 57 stocks in the S&P 500 Industrials Index gained after the Federal Reserve Bank of New York’s general economic index increased to 19.6, in line with the median forecast of economists surveyed by Bloomberg News. Prices of goods imported fell 0.6 percent in May, led by the biggest drop in petroleum costs since December 2008, Labor Department figures showed.

U.S. Manufacturing

“U.S. manufacturing, supported by low interest rates and the buoyant Chinese economy, are recovering steadily,” said Hiroichi Nishi, an equities manager in Tokyo at Nikko Cordial Securities Inc.

Rubber futures dropped to a three-week low on June 9 on expectations that supply from Thailand, the world’s largest producer and exporter, will increase seasonally.

Cash-rubber prices in Thailand extended gains yesterday as a slower-than-usual gain in supply wasn’t enough to meet increasing demand, the Rubber Institute of Thailand said on its website.

The free-on-board price of RSS-3 grade for July delivery gained 0.6 percent to 115.10 baht ($3.55) a kilogram yesterday, according to the institute.

The Shanghai rubber market is closed for a holiday and reopens on June 17.

(bloomberg.com)





Truckload of worries for domestic tyre makers as dragon closes in
Posted: 16 Jun 2010 06:40 PM PDT
Chinese truck tyres cost about 20% cheaper than Indian radials.

The margins of domestic tyre manufacturers are in likely come under pressure as the restrictions pertaining to import of Chinese truck radials have been relaxed recently following demand from original equipment manufacturers (OEMs) who were facing supply shortage in the country.

Tyre manufacturers are already grappling with the rising raw material prices and have recently hiked prices to partially pass it on to the consumers.

The Chinese truck tyres are on an average cheaper by around 20 per cent compared to Indian truck radials.

A trader or importer earlier had to obtain a license for importing tyres, which has now been made open by the Centre following demand from OEMs.

Rajiv Budhiraja, director general, Automotive Tyre Manufacturers Association (ATMA) said, "The license scheme was intended to regulate import and restrict it to actual users, like OEs and large transporters. With the opening up of imports, bulk of the trade would now be through traders".

The total tyre market in the country is around 15 lakh tyres per month and is expected to grow by around 10-11 per cent this fiscal. Nearly, 70 per cent of the net production is of truck radials. In value terms, the overall industry size is around Rs 30,000 crore, of which around Rs 3000 crore comes from exports. The size of the domestic truck tyre industry is close to Rs 18,900 crore considering the net domestic tyre industry size to be around Rs 27000 crore.

"Nearly, 60-70 per cent of the Chinese truck tyres goes into the replacement market which is also the biggest market for the indigenous tyre manufacturers. Around 78 per cent of their production is consumed by the replacement market, 10-12 per cent goes to the OEMs and the remaining for exports," informed Budhiraja. The relaxation of import regulations, hence, would hurt domestic tyre manufacturers dearly.

He feels that even the OEMs have been caught unawares in terms of the rising demand, while a 15 per cent growth was expected last fiscal, there was a demand escalation of around 28 per cent.

Now, however, the domestic tyre industry is in for a huge scaling up of capacity. "The overall capacity of the truck tyre industry will double from 90,000 tyres per month to around 1.8 lakh truck tyres per month within the next six months and will further rise to 2.5 lakh truck tyres per month within a year's time as all major producers including CEAT, Birla Tyres, Apollo Tyres and JK Tyres have chalked out major expansion plans", said A S Mehta, marketing director, JK Tyres, a market leader in the truck tyres segment. OEMs will then reduce dependence on imports and source domestically, he added.

On being asked whether the opening up of Chinese imports would put pressure on domestic truck tyre prices, Mehta said,"There would definitely be some pressure on the prices of the cheaper domestic variety of truck tyres. The premium brands are likely to be relatively immune".

An industry insider who did not want to be identified said that prices could be down by around 5-10 per cent in the wake of cheaper substitutes, or the tyre-makers would hold their plans to raise prices next quarter.

A Delhi based importer-trader of truck tyres R B Rubber Traders said that the Centre’s move could further boost sale of Chinese tyres in the replacement market. “We see a growth in demand for Chinese truck tyres in the replacement market”, the trader added.

With natural rubber prices hovering around Rs 170 a kilogram (kg), major tyremakers like JK Tyres and Apollo Tyres have raised prices in June first week. JK Tyres has raised prices thrice since January, in equal installments of 4 per cent each time. "We have raised our prices by around 12 per cent during this calendar year as rubber prices have almost doubled from Rs 90 per kg at the same time last year to around Rs 169 per kg now," Mehta said. Raw material costs have risen in the range of 20-25 per cent over the last one year including natural rubber and crude based raw material for tyres. Raw material costs account for around 70 per cent of the cost of tyre production. Of this, around 45 per cent is natural rubber and the remaining are crude based products like nylon,carbon black and certain chemicals.

Competition from Chinese tyres might further impact the margin of tyre makers that are already struggling to absorb the rising raw material prices.

(business-standard.com)





Less tapping may make NR more expensive
Posted: 16 Jun 2010 06:39 PM PDT
Storms and heavy rain in the last one week have brought tapping of rubber trees to a standstill in most parts of Kerala, paving the way for a further rise in prices.

In some parts of central Kerala, rain had damaged plantations and uprooted rubber trees, growers said. Since production was badly affected, the local market was bullish, with the price of benchmark grade RSS-4 rising to Rs 170 a kg.

The market is poised for a further rise in prices as growers are not releasing stocks in anticipation of a further rise. This has created a serious supply crunch. Even consumer industries are finding it difficult to procure rubber.

Both local and international prices have risen around 100 per cent in a year. In June 2009, the local market quoted Rs 99 for RSS-4 while the Bangkok market quoted Rs 82. Today, Bangkok quoted Rs 165 a kg.

According to producers in Kerala, production would be less by three-five per cent this month owing to loss of tapping days, as against a 2.9 per cent increase in the April-May period. In June 2009, production was 54,255 tonnes, as against 62,200 tonnes in June 2008. This time, monthly production is estimated around 52,000 tonnes.

The estimated fall in production in June will put pressure on supplies, which may lead to a sharp rise in prices. In April-June of last financial year, production declined 11.3 per cent to 159,325 tonnes.

A steady increase in consumption in the country is upsetting the market’s demand-supply equilibrium, a major factor behind the price surge. In the first quarter of 2009-10, consumption rose 1.7 per cent to 218,940 tonnes, as against a 11.3 per cent fall in production. The supply-demand gap is widening further.

In April and May this year, while production saw a 2.9 per cent increase, consumption rose 9.5 per cent. According to estimates, there is a gap of more than 100,000 tonnes annually in production and consumption of natural rubber in the country. This is likely to increase to 150,000 tonnes this financial year. So, the ongoing heavy rain in June may add to the worries of the rubber-consuming industries

(business-standard.com)





Sri Lanka mulls planting rubber in former northern war zone
Posted: 16 Jun 2010 06:36 PM PDT
The Sri Lankan government is considering planting rubber in the former war zone in the north to increase production and meet growing demand from local industries, the plantations industries minister said.
Mahinda Samarasinghe said the rubber research institute had identified an area north of Vavuniya and parts of Kilinochchi as potential rubber growing areas.
The areas are part of the island's dry zone which means rubber production will not get affected by rain as in the wet zone, where most rubber estates are now found.

They were also areas affected by the 30-year ethnic war which ended in May 2009 with the defeat of Tamil Tiger separatists.

"The rubber research institute thinks these areas may be suitable for rubber cultivation," Samarasinghe told a news conference.

"We've launched a programme to see if we can grow rubber there. The aim is to increase rubber production because right now the rubber crop is less than the demand."

Sri Lanka was once a big exporter of rubber but exports are now negligible compared with the world's top rubber exporters because production fell and demand rose from local industries, which now consumers most locally grown rubber.

Samarasinghe said he had held talks with local rubber industrialists who were clamouring for increased rubber production.

"The rubber industry says they have the ability to make more rubber products if raw material was available," he said.
"But they are now forced to import rubber because local production is not enough."

Local industries have also had to cope with record high rubber prices in recent months as production was disrupted by rain.

Samarasinghe said some 50,000 hectares are to be planted with rubber in southern Moneragala, also in the dry zone, under project launched a few years ago.

"Investors too are waiting for an opportunity to grow rubber."

(lankabusinessonline.com)