Rubber shoots up
Kottayam, Nov. 18
Spot rubber showed a up trend on Thursday. The undercurrent was firm following gains in the domestic and international futures but most grades remained unchanged as traders were reluctant to expand their commitments towards the weekend. The market continued to suffer from short supplies as widespread rains disrupted tapping in almost all major plantation areas.
Sheet rubber improved to Rs 196 (195) a kg according to traders. The grade closed firm at Rs 195.50 (195) a kg both at Kottayam and Kochi as reported by the Rubber Board.
Futures gain
The December series flared up to Rs 202.40 (196.87), January to Rs 204.80 (198.84) and February to Rs 207.90 (202.94) and March series to Rs 211 (205.82) a kg for RSS 4 on the National Multi Commodity Exchange.
RSS 3 bounced back at its November futures to ¥358 (Rs 194.77) from ¥348.4 a kg during the day session and then to ¥361.9 (Rs 196.92) in the night session on the Tokyo Commodity Exchange. The grade (spot) weakened to Rs 196.30 (197.24) a kg at Bangkok.
Spot rates were (Rs/kg): RSS-4: 196 (195); RSS-5: 185.50 (185); ungraded: 180 (180); ISNR 20: 192 (192) and latex 60 per cent: 130 (130).
China vows to tame inflation
Posted: 18 Nov 2010 03:59 AM PST
(Reuters) - China will intervene to control consumer prices if they rise too quickly, the government said on Wednesday, a move that will do little by itself to tame inflation but could foreshadow harsher monetary tightening.
Steps to cool demand in China, the world's fastest-growing major economy, could weigh on global markets at a time when recoveries in Europe and the United States remain fragile.
To begin with, the State Council, or cabinet, said it would aim to increase the supply of commodities, especially food, that have driven inflation to a 25-month high, while also clamping down on speculative demand that has lifted prices higher.
"We need to understand the importance and urgency of stabilising market prices and take forceful measures," it said after a routine meeting chaired by Premier Wen Jiabao.
"When necessary, temporary intervention measures will be implemented on prices of some important daily necessities and production materials," it added in the statement.
The State Council singled out grain, oil, sugar and cotton as markets that it wanted to stabilise. It also vowed to intensify a crackdown on price speculation and to punish those found hoarding commodities and pushing up prices by illegal means.
The statement made no mention of monetary policy.
"I don't believe that they will just stop here," said Kevin Lai, an economist with Daiwa Capital Markets. "Many people in the government are capable enough to figure out that prices controls are not that effective."
"They really have to do something more about controlling liquidity and money supply growth if they are serious about containing inflation," Lai said, adding that he expected the central bank to raise interest rates for the second time this year over the next two weeks.
MORE TIGHTENING AHEAD
Worries that the government could start tightening more aggressively drove China's main stock index down by 1.9 percent on Wednesday to a one-month closing low. The index has dropped 11 percent over the past four trading days.
Shi Chenyu, an economist with the investment banking arm of the Industrial and Commercial Bank of China, said the sternly worded statement showed that inflation had reached the top of Beijing's policy agenda.
"The government often opts for iron-fisted administrative measures to control prices when inflation becomes a serious problem," Shi said. "However, harsh administrative measures may backfire as expectations of further price rises may intensify."
The State Council said it would hold provincial governors accountable for the prices of "rice bags" and make mayors responsible for "vegetable baskets," though it did not specify how it would implement these directives.
The world's major consumer of farm commodities including cotton, corn and sugar, China has been releasing state reserves this year but has failed to cool record domestic prices.
Sudakshina Unnikrishnan, a commodities analyst at Barclays Capital in London, said China was expected to release further reserves of commodities such as sugar, but could step up import demand, fuelling upward pressure on international prices.
"While such measures would cool domestic prices in the near term, the international markets are tight," she said.
"If the Chinese reduce domestic reserves, they will have to increase domestic reserves later, so Chinese demand on international markets will increase." Other analysts predicted the government's statement would have little long-term impact on commodities prices, which have been rising sharply in China in recent months.
"Agricultural commodities price falls are likely to be moderate and regain upward strength if there aren't concrete measures such as tightening liquidity," said Lu Yun, an analyst with Shanghai JCI.
"There is nothing new in the statement, and the market has already anticipated such adjustment," added Lu.
Even if the government sold all its estimated 1 million tonnes of state sugar reserves, the market could soon digest it, said Liu Qiang, an analyst with Guohai Liangshi Futures Co.
GOOD FOR FARMERS
Apart from doubts about the effectiveness of price controls, Beijing may be reluctant to press down too heavily because more expensive food also supports one of its core policy objectives.
"The government has always said it wants to raise farmers' incomes and rising prices are a good way of achieving that," said Zhang Hanya, a researcher with the National Development and Reform Commission (NDRC), a powerful planning agency.
Instead of targeting food prices, the government should use part of its hefty revenues to subsidise city dwellers, he said.
Consumer inflation sped to a 25-month high in October, with prices rising 4.4 percent from a year earlier. Food, which makes up about a third of China's consumer price index, led the way, climbing 10.1 percent. Non-food items rose just 1.6 percent.
Unlike past bouts of food inflation in China, there have been no major droughts or diseases to stoke prices this year. Instead, fast money growth appears to be the primary culprit.
To that end, reports in the Chinese press on Wednesday pointed to interest rate increases, higher reserve requirements and more restrictions on bank lending as weapons in the government's arsenal against inflation.
Many economists also believe China will quicken the pace of yuan appreciation as inflation accelerates, because this would help to reduce the cost of imported goods.
China's futures prices for cotton, sugar and rubber have spiked in recent weeks, with analysts blaming excessive liquidity, supply disruptions, strengthening demand and a growing investor appetite for safe-haven assets.
A spike in demand for diesel-fired power generation has caused a supply shortage that could last into 2011, forcing Chinese refineries to import the fuel for the first time in nearly two years.
(Source: http://uk.reuters.com/article/idUKTRE6AH0AY20101118)
Apollo Tyres to up prices, rubber imports
Posted: 18 Nov 2010 03:54 AM PST
New Delhi: Apollo Tyres Ltd will have to raise prices by as much as 15-20% to sustain margins on record high rubber prices, a top official said on Thursday. “The situation looks challenging. Price increases are definitely inevitable, given the pressure we are facing on raw materials,” Sunam Sarkar, chief financial officer, told Reuters in an interview.
Indian tyremakers have been forced to buy rubber at record-high prices, as unseasonal rains tightened supply in the world’s fourth biggest producer.
The No. 2 Indian tyre maker is still deciding on a timeline to implement price raises, Sarkar said by phone.
Rubber prices make up over 40% of the cost of a tyre. The company will also have to increase imports at higher costs as domestic supply is not meeting demand, Sarkar said.
“Just out of sheer availability concern, we will have to import more rubber, because there is not enough available in the country today.”
Apollo imported 15000 tonnes of rubber in July-Sept.
India is in the midst of an auto boom. Car sales in India rose an annual 38% in October to record levels, as festive season demand combined with the rapidly expanding economy to pull buyers into showrooms.
But, leading tyre makers like MRF, JK Tyre & Indusries, Ceat Dunlop India and Falcon Tyres are also expected to go for another round of price hike soon to meet their cost for rubber.
Tyremakers have already raised prices at least thrice this year, as rubber prices jumped 46% to 203 rupees per kilogram since 1 January, 2010.
JK Tyre and Ceat have also posted lower profit for July-Sept despite the surge in auto market, struggling to sustain margins.
“We do not really have the margins to play around with. We are not like the software industry, where you have 30% or 40% margins,” Sarkar said.
Apollo’s Europe operations have better margins than the domestic operations, and the company plans to raise capacity on the continent by 20%, Sarkar said.
Earlier on Thursday, Apollo’s July-Sept profits slumped 59% to Rs. Rs. 53.22 crore, though sales saw a more modest paring to Rs. 1, 950 crore.
Shares of the Gurgaon-based company the market values at over $855 million, fell as much as 7% to Rs. 69.80 by 2:30 p.m. in a Mumbai market that was down more than 1%.
(Source: http://www.livemint.com/2010/11/11160826/Apollo-Tyres-to-up-prices-rub.html?h=B)
The Rubber Market Was Jittery After The Emergence Of High Inflation In China
Posted: 17 Nov 2010 07:04 PM PST
Shanghai and Tokyo rubber futures continued to retreat for a second consecutive day on Monday as investors and speculators unwound their long positions for profit-taking before both markets would settled mixed on Tuesday. At the same time, IRCo’s DCP and cash prices moved in tandem with the price movement on rubber futures.
It is expected that a 4.4% rise in the October inflation rate in China, a measure to control inflows of foreign money from elsewhere to China and a tighter lending policy by its central bank have signaled Chinese leaders to be wary of leading the Chinese economy into the brink of higher inflation and social violence in the country. In addition, a rise in both Ireland’s banks and its public debts may paralyze the European economy if euro zone members cannot agree on a package of aid for Ireland in time.
Furthermore, the U.S. Federal Reserve Bank of New York has started buying US$5.419 billion in Treasury bonds on Tuesday, according to a report by WSJ on 17 November 2010, this will lend support for the greenback to continue strengthening against the euro and the Japanese yen in coming days and it is one of many factors that can weaken crude oil futures and other commodity prices, including rubber futures. However, a weakening Japanese yen will raise yen-nominated prices on Tokyo rubber futures.
(Source: http://www.irco.biz/BlogMoreDetial.php?id=2711&ShowContent=news%20&PHPSESSID=734b7f0627235560d7590ba796b6afb6)
Hot Money, Bad Weather to Keep Rubber Prices High Into 2011
Posted: 17 Nov 2010 07:00 PM PST
Natural rubber prices have nearly tripled from the lows seen during the global financial crisis, but that is unlikely to lead to a reversal in the market as below-trend production and rising demand will continue to support prices around the current levels, industry participants said Tuesday.
This could leave major consumers such as tire makers with few options other than passing on some of the rising costs to end consumers to maintain profitability.
The market is "likely to stay high into the second quarter of 2011; it would be difficult for prices to come down below $3/kilogram," said Yium Tavarolit, chief secretary of the International Rubber Consortium, a grouping of key producers in Southeast Asia.
Yium had earlier predicted natural rubber would hit $4/kg by the first quarter of 2011, but current prices are already well above that level, as a recent rally in the futures markets took prices on the Tokyo Commodity Exchange to Y383/kg last week, a level not seen since 1980. That was a 280% increase from December 2008 when the market briefly slipped below the Y100/kg-mark amid the global economic downturn.
Prices have come off a bit since then, but many see this as a necessary correction as the market was heavily over-bought. On Tuesday, the benchmark April contract on the Tocom settled Y4.6 or 1.3% higher at Y358.3/kg.
Tocom prices have limited downside from here, as the Y350/kg level is generally acceptable to most buyers, said Kaname Gokon, deputy general manager in Japanese brokerage Okato Shoji Co's research section. The brokerage is one of the top 10 trading members in Tocom rubber, in terms of volumes traded.
By all accounts, both fundamentals and speculative factors are supportive, with forecasts for 2010 prices well above $3/kg.
Underpinning the strength in the market this year is the weather, which has been persistently unfavorable, with the El Nino first and La Nina later, contributing to lower production throughout the year in major producing countries such as Thailand, Indonesia and Malaysia. The three countries together account for about 70% of the global supply.
The supply crunch is unlikely to ease anytime soon as it won't be long before major producing regions enter the dry wintering season around February when trees shed leaves and production falls.
That, coupled with the excess liquidity unleashed by the latest round of quantitative easing measures by the U.S. Federal Reserve, will continue support prices till the second quarter of 2011, added Yium.
Some consumers such as tire companies have already passed on some of the rising costs to end-buyers, as demand for new and replacement tires has been firm, with any softening seen as limited.
There may be little comfort on the supply front even in the medium term as at least 20,000 hectares of Thai plantations have been affected by recent flooding and storms, possibly reducing production further.
As a short-term response, plantation owners have been postponing their replanting programs this year to keep the estates in production while prices remain high, said Thai Rubber Association President Luckchai Kittipol.
"Obviously, the deficit would be greater than anticipated; the recent supply problems were unexpected and have pushed up prices more than expected," said Prachaya Jumpasut, the UK-based Managing director of The Rubber Economist and a former head of Economics and Statistics at the International Rubber Study Group.
(Source: http://www.irco.biz/BlogMoreDetial.php?id=2710&ShowContent=news%20&PHPSESSID=734b7f0627235560d7590ba796b6afb6)
Friday, November 19, 2010
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