Rubber Gains to Four-Month High as Japan Car Sales Improve Demand Outlook

Rubber Gains to Four-Month High as Japan Car Sales Improve Demand Outlook
Posted: 27 Aug 2010 12:03 AM PDT

Rubber gained for a second day, climbing to the highest level since April 30, as expanding car sales in Japan raised speculation that demand for the commodity used to make tires may increase.
Futures climbed as much as 1.7 percent, heading for a second weekly increase, after the Nikkei newspaper reported that Japan’s new car sales from Aug. 1 to Aug. 23 surged by 73 percent from the same period last year to more than 149,000.
Sales increased as consumers sought to benefit from a government subsidy program for fuel-efficient cars, which is scheduled to finish at the end of September, said Kazuhiko Saito, an analyst at Tokyo-based broker Fujitomi Co. Demand for rubber and other raw materials used in cars may be sustained at least until the program expires, he said.
“Consumers are advancing car purchases to take advantage of the subsidy program, which appears to have had a positive impact on raw-material demand,” Saito said today by phone.
The February-delivery contract rose to as high as 298.9 yen per kilogram ($3,538 a metric ton) before trading at 298.8 yen on the Tokyo Commodity Exchange at 1:35 p.m.
Gains in futures were limited as Asian stocks declined, curbing investor appetite for riskier assets, Saito said. Equities and crude oil dropped amid speculation that the U.S. government will cut its estimate for second-quarter growth.
U.S. Outlook
A U.S. report today will show gross domestic product grew 1.4 percent in the second quarter, compared with the 2.4 percent the government estimated last month, according to the median forecast in a Bloomberg News survey of economists.
Bernanke will discuss the outlook for the economy and possible policy responses tomorrow at the central bank’s annual symposium in Jackson Hole, Wyoming.
Cash rubber prices in Thailand, the largest producer, climbed 0.8 percent to 105.6 baht ($3.36) per kilogram, the Rubber Research Institute of Thailand said yesterday. The gain was driven by demand from rubber processors and limited supply availability, it said.
Heavy rainfall is likely across Thailand until the end of August, according to the Thai Meteorological Department. Rain disrupts tapping rubber trees, leading to output declines.
January-delivery rubber on the Shanghai Futures Exchange dropped 0.3 percent to 25,435 yuan ($3,741) a ton at the 11:30 a.m. local-time trading break.
(bloomberg.com)


Growers, traders cool to duty cap on rubber imports
Panel's recommendations on levy termed ‘fair'.


Kochi, Aug. 27

The decision of the Union Commerce Ministry to impose a duty cap of Rs 20.46 a kg on rubber imports or a customs duty of 20 per cent, whichever is lower, has found all round acceptance among the rubber growers and traders. The decision was based on the report of a high-level panel constituted by the Government and headed by the Rubber Board Chairman, Mr Sajen Peter. Rubber prices have fallen from their recent peaks after the Commerce Ministry announced the non-advalorem duty cap on rubber imports.

We have tried to be impartial and fair in our recommendations to all segments of the rubber sector, be it the grower, trader or the consuming industry, sources in the Rubber Board said.

Without the industry the Indian rubber farmer would not survive and without the farmer the Indian rubber industry would not survive. We have tried to ensure the survival and growth of all stakeholders, they added.

Fair decision

Terming the decision fair, a source in Harrisons Malayalam, the largest rubber plantations group in the country, said that the cap would start working only if domestic prices rule higher than the international prices. The new ruling is likely to deter unhindered growth in rubber prices while at the same time offering more competitive prices to the industry.

Historically the demand for rubber has invariably been in sync with supply and close 98 per cent of domestic demand being met from domestic production. When the protection meted out to industry and rubber growers were withdrawn during the last decade, Indian and international prices were expected to narrow down and become uniform. However, domestic rubber prices were persistently quoting below global prices during the last five years but for the year 2009, Mr J.K. Thomas, former President of the United Planters Association of Southern India, said.

This was partly because the domestic rubber industry was dominated by some major players who accounted for 50-55 per cent of the domestic consumption. The production segment was dominated by small and medium-scale growers who accounted for 90 per cent of the Indian rubber production. In this background, Mr Thomas advocated strict vigil by the Government on imports stating that specific quantities could be imported at specific prices to contain major price disparities. An annual review on import duty cap would also be beneficial to the grower and the industry.

Review prices

After the decision to impose 20 per cent duty was taken in 2004, it was high time that a review of the prices and duties on natural rubber was undertaken, Mr N. Radhakrishnan, former President of the Cochin Rubber Merchants Association said. The average rubber prices were Rs 55.71 and the import duty worked out to Rs 11.42 a kg in 2004. By 2010, the prices peaked over Rs 180 and the duty rose to Rs 30 a kg. He felt that the reduction in duty to Rs 20.46/kg would be in favour of the industry, which was evident in the recent fall in prices. With the demand for natural rubber poised to overtake domestic supply, remunerative prices to the farmer were mandatory to ensure faster extension and accelerated production of this vital crop.

Buyer resistance weakens spot rubber


Kottayam, Aug. 27

Spot rubber turned weak on Friday. According to sources, the prices fell on buyer resistance though there were no quantity sellers in the main marketing centres. Sheet rubber fell sharply to Rs 170 from Rs 174 a kg following the declines in the domestic rubber futures on the National Multi Commodity Exchange. Meanwhile, ungraded rubber ended flat amidst dull volumes but latex 60 per cent improved on supply concerns. The Board's rate weakened to Rs 173 (174) a kg for RSS 4.

Futures decline

In the futures, the September series declined to Rs 168.90 (173.38), October to Rs 165.10 (167.91), November to Rs 164.01 (166.08) and December to Rs 164 (166.23) a kg for RSS 4 on the National Multi Commodity Exchange.

RSS 3 improved at its September futures to ¥319.6/Rs 177.09 (¥314.3) a kg during the day session but then slipped to ¥319.4 (Rs 176.98) during the night session on the Tokyo Commodity Exchange. The grade (spot) firmed up to Rs 158.08 (157.64) a kg at Bangkok.

Spot rates were (Rs/kg): RSS-4: 172 (174); RSS-5: 164 (165); ungraded: 162.00 (159.50); ISNR 20: 151 (151) and latex 60 per cent: 113 (112).