Rubber futures rally as China enters market

Rubber futures rally as China enters market


Kochi, Oct. 20

Rubber futures rallied to Rs 200 a kg on Wednesday, catching the market by surprise. The current rally is a reflection of the trend in the international market where inadequate supply has been compounded by the entry of China as a big buyer, said Mr N. Radhakrishnan, Advisor to Cochin Rubber Merchants Association. This is reflected in the surge in the Indian and international futures prices.

The fact that the Government is still to decide on a final rate structure for import of natural rubber has compounded the crisis for India.

While the customs duty continues to reign at 20 per cent, the Rubber Board had recommended its reduction to 13.5 per cent based on the average prices prevailing in the last three years. The consuming industry had demanded that the rates be reduced to 7.5 per cent. The Government is still to make a final announcement.

For the rubber growing regions, the uninterrupted rains since June has hindered tapping operations and October output is expected to be lower. The persistent rain also raises the threat of fungal and bacteriological disease on the tree and this could also hamper long-term productivity.

The prevalent high prices are expected to induce the farmer to tap the tree and expose the bark to rainwater, increasing the possibility of fungal attacks.

Global production is also feared to be affected due to the emergence of the La Nina factor. Increased rains are reportedly hampering production in major producing countries such as Malaysia, Thailand and Indonesia. It was while these supply constraints had hit the global markets that China entered as a major buyer. China has been buying and stocking natural rubber to feed its booming automobile and tyre industries.

Speculation

Given the fact that the futures prices have touched the Rs 200 levels for the peak production months of January-February, sources in the trade said that there could be some speculation in the market. Pointing out that speculation in rubber futures is playing havoc with the physical market, the Automotive Tyre Manufacturers Association (ATMA) has asked for suspension of futures trading in rubber.

In a communication to the Forward Markets Commission and the Rubber Board, Mr Rajiv Budhraja, Director–General of ATMA, said: “On October 18, the futures went up by as much as Rs 5 for the November contract touching Rs 191 a kg.

As of today, the futures have touched Rs 200 for January contracts. As a direct fallout of the speculative activity in the futures market, the growers are holding back the stock, expecting a rise in prices, aggravating the scarcity challenges for natural rubber consumers.”

Traded volumes have jumped to an average of 8,000 tonnes from the normal average of 3,000-4,000 tonnes indicating heavy speculative activity. On the other hand, the open position has been successively coming down clearly indicating that intra-day players are on the prowl, Mr Budhraja said.



Supply concern lifts spot rubber


Kottayam, Oct. 20

Physical rubber prices reached record highs on Wednesday. Major consuming industries were practically inactive but there was no selling pressure even at higher levels. According to the Rubber Board, the grade firmed up to Rs 187 (185) a kg at Kottayam and Kochi.

The October futures for RSS 3 weakened to ¥324 (Rs 176.90) from ¥328.2 a kg during the day session on the Tokyo Commodity Exchange. The grade (spot) moved up to Rs 178.95 (178.03) a kg at Bangkok.

Spot rates were (Rs/kg): RSS-4: 190 (186); RSS-5: 180 (175); ungraded: 175 (172.50); ISNR 20: 186 (183) and latex 60 per cent: 121 (119).(The Business Line)