Tyre firms buy rubber at record $4.33 a kg

Tyre firms buy rubber at record $4.33 a kg
Posted: 01 Nov 2010 06:06 PM PDT
SIR20/SMR20/STR20 processing line not for tyre or recycle hnsinyoung.com
Indian tyre makers on Monday bought natural rubber at Rs 192.5 ($4.33) a kg, a record high as unseasonal rains tightened supply in the world’s fourth biggest producer, three dealers said.

Tyre makers bought RSS-4 rubber (ribbed smoked sheet) paying as much as Rs 19,250 a quintal at Kottayam, a key spot market in southern state of Kerala, higher than Rs 19,100 they paid last month.

Earlier in the day, the benchmark rubber November contract on the National Multi-Commodity Exchange (NMCE) hit a contract high of Rs 19,837 a quintal, the highest level for the near month contract since futures trade launched.

"Lower supplies are pushing up prices...rainfall is disturbing tapping. On weekend, Kerala received rains," said Ibrahim Jalal, treasurer of The Indian Rubber Dealers Federation (IRDF).

Weather department on Monday said Kerala, which accounts for nearly 90 per cent of the country’s output, may get rains in next four days.

Usually rubber supply in India peaks during October-January, but this year unseasonal rains have been hindering any progress in tapping.

India is likely to produce less than 85,000 tonnes of natural rubber in October, down 10.5 per cent from earlier estimate as heavy unseasonal rains adversely affected tapping, industry and government officials said last week.

Jalal sees the current high prices sustainable, if rains continue in Kerala for some more days. "Demand is very good from tyre and other rubber consuming industries," he said.

The record high rubber prices are hurting margins of local tyremakers that have been struggling to pass on the cost to end-users. Heavy unseasonal rains in key natural rubber producing countries are likely to worsen tight supply situation in October-December, the Association of Natural Rubber Producing Countries (ANRPC) said last week.

(sify.com)


Spot rubber zooms to new high


Kottayam, Nov. 2

Spot rubber made yet another record closing on Tuesday. The market continued to explore new highs anticipating further gains in the days ahead ridden by the domestic and international supply concerns.

According to observers, there were no quantity sellers on any grade even at the existing levels and the market made all-round gains on fresh buying and short covering. The price is ruling very high now and it is injurious to all the stake holders in the industry, according to Mr. N. Radhakrishnan of the Cochin Rubber Merchants Association. The Government should change the duty structure as recommended by the Rubber Board and allow import forthwith.

According to official reports, there ought to have been a stock of 2.5 lakh tonnes of rubber in the country. But in reality, the market faces acute shortage of the raw material in all sectors, he said. Sheet rubber improved to Rs 194.50 (193) a kg in the main marketing centres. According to Rubber Board, the grade increased to Rs 194 (192) a kg both at Kottayam and Kochi.

In futures, the November series for RSS 4 concluded at Rs 196.74 (196.49), December at Rs 199.25 (199.51), January at Rs 201.65 (201.76) and February at Rs 203.90 (203.66) a kg on the National Multi Commodity Exchange. The total open interest in all series was 5,331 lots. RSS 3 flared up with November futures rising to ¥324.5 (Rs 178.11) from ¥316.7 during the day session and then to ¥325.5 (Rs 178.69) in the night session on the TOCOM.

Spot rates were (Rs/kg): RSS-4: 194.50 (193); RSS-5: 185 (182.50); ungraded: 181.75 (178.75); ISNR 20: 190 (189) and latex 60 per cent: 126.50 (125.50).



FMC to take call on Rubber futures' fate

AHMEDABAD (Commodity Online): The National Multi Commodity Exchange (NMCE) has argued that the demand for suspension of futures trade from the tyre industry is not based on facts but on the basis of surmises that Automobile Tyre Manufacturers’ Association (ATMA) has developed about futures trade.

The NMCE has demanded for a joint consultation of industry and the exchange with the commodities market regulator, Forward Markets Commission (FMC) to clear out the misconception prevailing about the futures trade.

Earlier in the month of October, ATMA had written a letter to FMC seeking intervention of the commission for temporary suspension of futures trade or alternatively reducing of daily price cap from 4% to 1% and publishing detail of open position by the Exchange.

Meanwhile, the regulator is still considering arguments from both the sides and the outcome is expected soon. In an interaction with Commodity Online over the phone, Rajiv Aggarwal, Director, FMC said, “We have received a letter from the NMCE and considering the representations made therein. However, we have not come to any conclusion so far and will take a final decision in some time.”

To the NMCE’s demand for a joint meeting with ATMA, Aggarwal maintained that all the demands were still under consideration and the regulator would take a call in due course of time.

Even as the market regulator maintains sharp vigil over the volatile price fluctuations in the commodities, the rubber consumer industry had once again reiterated their demand for a suspension of futures trading in natural rubber, which is blamed to be manipulating prices and creating artificial inflation in the plant crop.

The prices of rubber have surged to record peak levels in a short span of time, leaving rubber consumer industry in jitters. The tyre makers constitute more than 80% of the total natural rubber demand in the country.

To this, the market regulator had asked clarification from the NMCE. In response to it, NMCE clarified that the inflationary situation in rubber prices is caused due to fundamental reasons, which includes recent spell of excess rains in the plantation area causing disruption in taping, and global rubber shortage and not due to futures trading.

NMCE firmly ruled out any manipulation in rubber prices via exchange trading or futures trading. “This issue has been raised many times earlier also and we had given facts to prove that ATMA's point of view was merely on surmises and not on facts,” NMCE wrote in a letter to the FMC.

NMCE also pointed out the rising manufacturing capacities of tyre makers, which is adding to the consumption demand of rubber, causing further price escalation. As domestic supplies are limited and not sufficient to cater to the rising industrial demand, the trade body, ATMA had demanded imports of Rubber at reduced duty.

In its letter to the FMC, Rajiv Budhraja, Director General, ATMA noted that ‘While, rubber futures for the November contract had touched Rs.191 per kg from Rs.186 per kg earlier, the futures for January contract touched Rs.200 per kg. This made growers to hold back stocks, as they expect a rise in prices on account of aggravation of NR scarcity.

The letter further noted, “Traded volumes jumped to an average of 8,000 tonnes from 3,000-4,000 tonnes earlier, indicating heavy speculation. The open position is also successively declining, clearly showing that intra-day players are on the prowl. We fear a bubble is in the making and that action needs to be taken to keep the market under check. Otherwise, such speculation may affect genuine stakeholders in the NR value chain, that is, rubber growers, dealers as well as consumers, adversely.”

To this, NMCE responded saying, “…in the entire supply chain of Rubber, all the stake holders, right from small growers to user industry have been participating and contracts are being settled through 100 % physical delivery leaving no space for the default or distortion which may happen in cash settled contracts. In this case the big buy position is held by the hedgers, tyre company, ATMA member and big Cooperative society (supplier to the tyre companies).”

Giving details about the open interests, NMCE maintained that in November month, 323 clients through their 21 members are holding OI of 1589 MT, which works out to 5 MT per client. Similarly, in December contract, 388 clients have been holding position of 2069 tons through 20 members.

“This indicates wide spread participation of all the stake holders and the talk of working of cartel in Rubber futures by ATMA is nothing but lobbying to serve the interest of certain group of the tyre manufacturers for taking command of the entire market,” NMCE maintained in the letter.

The exchange has also requested the FMC to call a meeting of MDs of tyre companies and explain to them the factual position.

“Exchange is willing to participate and make presentation in such meeting. In view of the facts stated herein above, we feel that tyre manufacturers should come out with the detail of capacity expansion by their members and the production data of their final product using natural rubber,” the exchange said.(commodityonline.com)