International Rubber Consortium limited (Irco): Market review Second quarter 2010

International Rubber Consortium limited (Irco): Market review Second quarter 2010
Posted: 07 Jul 2010 11:59 PM PDT

IRCo’s Daily Composite Price (DCP) continued its rally into the second quarter of 2010 and recorded an all time high of 350.67 US cents/kg. on 15 April 2010. It had earlier, on 26 March at 327.25 US cents/kg., breached the pre global economic crisis high of 325.74 US cents/kg. recorded on 2 July 2008.

For the second quarter of 2010, the DCP averaged at 317.45 US cents/kg. and stayed above the 300.00 US cents/kg. level for the majority of the period under review. Out of a total of 63 trading days during the period under review, the DCP was above the 300.00 US cents/kg. level for 47 trading days.

It began on the first trading day of the period at 335.37 US cents/kg. and continued its rally to reach an all time peak of 350.67 US cents/kg. on 15 April, managing to stay above the 350.00 US cents/kg. level for a couple of trading days before easing by 17.69 US cents/kg. to 332.98 US cents/kg. on 30 April. It then plunged by 41.17 US cents/kg. within 11 trading days to reach the lowest for the period at 291.81 US cents/kg. on 17 May. It recovered to over the 300.00 US cents/kg. level on 24 May, except for 5 days in the second week of June, and closed on 30 June at 303.27 US cents/kg.



Thai RSS3 again was the leader in setting the record breaking pace in physical natural rubber prices into the first month of the second quarter, recording an all time high of 405.83 US cents/kg. on 26 April. TSR 20 grades too set new all time records, led by STR 20 at 358.34 US cents/kg. on 21 April, SIR 20 at 353.00 US cents/kg. on 6 April and SMR 20 at 336.05 US cents/kg. on 15 April.


The DCP 14-Day Moving Average opened at 324.62 US cents/kg. and took 16 trading days to overtake the DCP on 23 April before breaching it again on 24 May and thereafter moving conversely against the peaks and lows of the DCP to close the period at 305.42 US cents/kg. The highest DCP 14-Day Moving Average recorded for the period was at 346.78 US cents/kg. on 26 April whilst the lowest was at 298.20 US cents/kg. on 25 May.

The strong upsurge in physical natural rubber prices up to the middle of April was mainly due to the shortage of RSS 3 and excessive speculation in the TOCOM and SICOM compounded by the purchase of the same material, namely field latex, by latex concentrate processors.

Whilst the reverse, with a sharp decline in prices from mid April to mid May, was due to the absence of major buyers, especially China, where releases from government stockpile and drawdown on stocks bought earlier at much lower prices were undertaken to ease the pressure of high prices in the international market.

Nevertheless, steady demand. as evident in spot and nearby month purchases, with uncertainty over supply coming back to normal with the end of the wintering season had underpinned the decline in prices and maintained them above the 300.00 US cents/kg. level during the majority of the period.

Among the notable factors that influenced the physical rubber market and prices during the period under review include:

1. The wintering season in the northern hemisphere was at its peak in the first half of April and eased off thereafter but its lingering effect transcended into May. Production did not revert back to normal as expected and the problem was compounded by unexpected downpours in June which disrupted tapping activities.
2. The lingering tightness in supply in Thailand continued to force latex concentrate producers to compete for the same material creating further pressure on RSS 3 prices
3. China released 60,000 tonnes of natural rubber from the government stockpile estimated at 180,000 tonnes and drawdown on stocks by 120,000 tonnes out of 160,000 tonnes in Qingdao’s warehouses, bought earlier at much lower prices, in efforts to mitigate the high prices and pressure from tight supplies.
4. Consumption remained robust despite major consumers had slowed down their purchases in anticipation of further price decline or sidelined by drawing down their inventories.
5. Concerns were still lingering over the contagion effects from the Greek financial crisis which may impact other Euro zone countries which might slow down the global economic recovery.
6. The euphoria over China’s announcement on 19 June that it will allow more flexibility with its yuan exchange rate diffused after a couple of days after the fact sink in that any effect would seep in over a period of time. It augurs well for natural rubber in the long term because it will make imports cheaper.
7. Prices of crude oil declined during the period under review reflecting the concerns and low confidence in the contribution of the western economies towards the total global economic recovery. Prices on the NYMEX opened on 1 April at US $84.84 per barrel and closed on 30 June at US $ 75.63 per barrel. The highest recorded was US $ 86.84 per barrel on 6 April with the lowest at US $ 68.01 per barrel on 20 May.
8. Regional currencies held steady against the US dollar. The Thai Baht moved from 32.36 to 32.46, the Indonesian Rupiah from 9,064 to 9,068 and the Malaysian Ringgit from 3.26 to 3.25. The yen, however, strengthened against the greenback moving from 93.71 to 88.65.
The following table shows the movement of prices at the various rubber markets during this quarter:



(Irco.biz)





Rubber Gains to One-Week High as U.S. Sales Ease Growth Concern
Posted: 07 Jul 2010 11:49 PM PDT
By Aya Takada

July 8 (Bloomberg) -- Rubber advanced to a one-week high after a U.S. trade group said that retail sales increased at the fastest pace in four years, stoking optimism that demand for the commodity used in tires may strengthen.

Futures in Tokyo climbed as much as 2.6 percent to the highest level since June 29. The price also increased as an advance in oil boosted the appeal of natural rubber as an alternative to synthetic products made from petroleum.

Asian stocks extended a global rally after the International Council of Shopping Centers said sales were growing at the fastest pace since 2006, easing concern that a slump in consumer confidence will undermine the recovery of the world’s biggest economy. The dollar advanced against the Japanese currency, raising the appeal of yen-based contracts.

“A rally in equities markets improved investor sentiment, leading to purchases of the commodity,” Hisaaki Tasaka, analyst at Tokyo-based broker ACE Koeki Co., said today by phone.

December-delivery rubber gained as much as 6.9 yen to 277 yen per kilogram ($3,136 a metric ton) before trading at 275.9 yen on the Tokyo Commodity Exchange at 11:21 a.m. local time.

The shopping centers group said retail sales probably expanded at an average monthly rate of 4 percent in the first five months of the retail fiscal year that began Jan. 31.

U.S. Economy

“The focus now is on how the U.S. economy is doing,” said Mitsushige Akino, who oversees $450 million at Tokyo-based Ichiyoshi Investment Management Co. “The general consensus was that the economy was going to deteriorate, and the good retail sales put a brake on that view.”

Crude oil for August delivery gained 1.2 percent to $74.92 a barrel in electronic trading on the New York Mercantile Exchange at 11:23 a.m. Tokyo time. Yesterday, the contract rose 2.9 percent to $74.07.

The November-delivery rubber on the Shanghai Futures Exchange added 1.8 percent to 22,190 yuan ($3,275) a ton.

The benchmark price in Thailand remained unchanged for a fifth day at 112.60 baht ($3.47) a kilogram yesterday, according to the Rubber Institute of Thailand. The group reviews the price daily and issues data in the afternoon.

Tight global supplies and strong demand, especially from China, will support prices, the Association of Natural-Rubber- Producing Countries said in its June newsletter. Gross imports of natural rubber by China, the largest consumer, are projected to climb 5 percent this year to 1.67 million tons, it said.

(bloomberg.com)





Rubber Futures in Tokyo Advance as Much as 2% to One-Week High
Posted: 07 Jul 2010 11:48 PM PDT
By Aya Takada

July 8 (Bloomberg) -- Rubber futures in Tokyo advanced as much as 2 percent to a one-week high as a rally in global stocks boosted investor confidence, increasing appetite for risk. The December-delivery contract increased to 275.5 yen per kilogram on the Tokyo Commodity Exchange, before trading at 275.3 yen at 9:57 a.m. local time.

(bloomberg.com)





IRCo's WEEKLY MARKET SNAPSHOT: 28 June - 2 July 2010
Posted: 07 Jul 2010 11:47 PM PDT

IRCo's DCP shed US 11.75 cents per kilogram during the week under review as disappointing economic data dampened sentiments and depressed prices both on the futures and physical markets.


Whilst fundamentals were still strong, Chinese buyers especially were on the sidelines for lower prices with expectation of increasing supply with improvement in the weather in the major producing regions despite stocks and inventories at low levels.

With concerns that negative economic indicators would stall the world economic recovery, equity markets slipped across the board and crude oil futures dropped by more than US $6.00 per barrel. Regional currencies weakened against the US dollar but the Japanese yen remained strong.



(irco.biz)





India Becomes 2nd Largest NR Consumer
Posted: 07 Jul 2010 11:44 PM PDT
India has become the second largest consumer of natural rubber surpassing U.S. but after China, according to data released by the Rubber Board of India recently.

India has recorded a growth of rubber consumption in 2009 at 2.7% or 905,000 tonnes, up from 881,000 tonnes in 2008 while rubber consumption in U.S. declined by 34% dropping to 687,000 tonnes in 2009, compared with 1.04 million tonnes in 2008 due to the financial crisis.

China, the world’s largest rubber consumer, had rubber consumption in 2009 at 3.46 million tonnes, compared with 2.94 million tonnes in 2008.

Global natural rubber consumption declined by 7.7% to 9.39 million tonnes in 2009, down from 10.17 million tonnes in 2008.

India’s growth in rubber consumption was in tandem with the growth in its automobile sector which recorded a 13.4% growth in rubber consumption as compared to 2.5% growth in 2008-09. Total vehicle sales in 2009-2010 was 12,292,770 units compared with 9,724,243 units in the previous financial year.

The rise of tyre production during 2009-10 was 2.5% for truck and bus tyres and 21% for passenger car tyres

(irco.biz)





Tyre firms question deficit figures from Rubber Board
Posted: 07 Jul 2010 11:42 PM PDT
Kochi: Tyre manufacturers have expressed fears that the supply deficit in natural rubber during the current financial year that ends March 2011 would be twice the projection given out by the state-run Rubber Board.

Rubber Board has projected the supply deficit to touch 85,000 tonne in 2010-11 based on incremental production of 70,000 tonne during the year, while the Automotive Tyre Manufacturers Association (ATMA) claims that the consumption estimates of the board are rather conservative.

“We estimate the deficit to soar to 1,75,000-1,80,000 tonne which is almost double the projections of the board. Our estimate is driven by consumption growth which is more reliable. We estimate consumption to grow by 12-15%, while production would fall short at 5-6% growth,” Rajiv Budhraja, director general of ATMA said.

The shortfall in natural rubber would lead to higher rubber prices which if passed on to the customers will trigger inflationary trends in the entire value chain of transport sector, he added.

Tyre manufacturers have asked the Centre to move on to a fixed tax on imports of natural rubber rather than the existing ad valorem. They said new entrants into the field like Michelin and Yokahama, would increase the demand for rubber leading to a situation where the availability of rubber would constrain production and profitability.

The tyre industry is also asking for duty free import of 2 lakh tonne of natural rubber to ‘cool off’ the rising prices. Natural rubber prices have touched an all-time high of Rs 180 per kg, an 80% increase over the average June, 2009, price of Rs 100 per kg.

The industry has been held “hostage” to extreme uncertainty in terms of pricing and availability of rubber, causing production disruptions and planning in disarray, Kaushik Roy, Convenor of ATMA Raw Materials Group said. The board has overlooked the huge capacity addition coming up in the near-term, he added.

ATMA estimates that during 2010, Modi, Birla Tyres, Apollo and Ceat would need more rubber due to capacity addition, while in 2011, Michelin and Yokahama are expected to start production in India. Most of the natural rubber stock in the market is fresh stock. The industry does not find any evidence of the 2 lakh-tonne-plus buffer stock as stated by the Rubber Board, Roy said.

(financialexpress.com)





Spot rubber shows mixed trend
Posted: 07 Jul 2010 11:41 PM PDT
On Wednesday (07 July 2010), the spot rubber prices showed a mixed trend. There were no fresh incentives to keep the market live as the domestic futures were almost steady. Sheet rubber prices declined to Rs 182 from Rs 182.50 per kg amidst scattered transactions.

The July futures for RSS 4 declined to Rs 185.21 (185.24), while the August futures increased to Rs 178.60 (176.24), September to Rs 170 (167.40) and October to Rs 163.60 (162.01) per kg on the National Multi Commodity Exchange.

Spot rates were (Rs/kg): RSS-4: 182 (182.50); RSS-5: 177.50 (177); ungraded: 175 (174.50); ISNR 20: 159.50 (160) and latex 60 per cent: 127 (127).

(indiainfoline.com)