Demand to ban rubber futures rejected

Demand to ban rubber futures rejected

Special Correspondent
‘It is the shortage of rubber supply that has led to rise in prices of tyres'

NEW DELHI: Rejecting the demand of tyre manufacturers to ban futures trading in rubber, Managing Director and CEO of National Multi Commodity Exchange of India (NCME) Anil Mishra has urged trye-makers to actively get involved in futures market rather than keeping away from it.

“Not many from the tyre industry are seen taking the calculated method to recover their costs and participate in the futures trade in rubber. Instead of doing so, they are blaming the futures trading in the commodity as one of the key reasons for price escalation, which is not correct,” he said.

It was surprising that the industry that champions the cause of liberalisation and market reforms was arguing for ban on futures when it came to natural rubber, he added.

Replying to questions raised by the Automotive Tyre Manufacturers' Association (ATMA) before the Forwards Markets Commission on the issue, NMCE has explained that it was the shortage of rubber supply that had led to rise in prices of tyres. “Global rubber consumption is rising at a rapid pace with supply-side being constrained on unfavourable climatic conditions, the tyre makers across the world are crying foul over the rising input costs of the key ingredient for the industry, rubber. This causes them to raise the prices of their final products, thereby adding to the inflationary pressure in the economy,” he said.

Stating that futures trading in rubber was totally transparent, Mr. Mishra said: “Many of the tyre companies feel that if they buy in NMCE they would fuel the price, as they are big players constituting about 60 per cent of the total market. The truth is just the opposite…if the tyre companies would buy in physical markets it gets known immediately and it fuels the price because each market centre is very small and the demand gets multiplied because same order flows through many suppliers and gets released one time.”(The Hindu)



Mixed trend in rubber


Kottayam, Jan. 18

Spot rubber showed a mixed trend on Tuesday.

Though the undercurrent was bullish, RSS-4 and ungraded rubber slipped marginally following the weakness on the National Multi Commodity Exchange (NMCE) during early trades.

But they failed to react in tune with the recovery in domestic futures during late trading hours. The sentiment was positive as buyers remained active in the remaining grades including latex. Volumes were comparatively dull.

Among other reports, the key Tokyo rubber futures slipped as oil prices fell and investors turned cautious at higher levels.

Traders expect further gains in the days ahead on concerns over tight supplies and sustained demand from emerging countries.

According to dealers, sheet rubber weakened to Rs 225 (226) a kg on buyer resistance.

The grade closed unchanged at Rs 225 a kg, as reported by the Rubber Board.

FUTURES IMPROVE

The February series improved to Rs 231.74 (228.93), March to Rs 236.99 (234.06), April to Rs 245.00 (243.01) and March to Rs 250 (248.93) a kg for RSS 4 on the NMCE.

Volumes totalled 13,118 lots and open interest 10,505 lots. The turnover was Rs 307.69 crore.

RSS 3 (spot) firmed up to Rs 252.78 (251.91) a kg at Bangkok.

The January futures for the grade slipped to ¥453 (Rs 249.42) from ¥453.5 a kg during the day session but then remained inactive in the night session on the Tokyo Commodity Exchange.

Spot rates were (Rs/kg): RSS-4: 225 (226); RSS-5: 218 (217); Ungraded: 208 (209); ISNR 20: 220 (219) and latex 60 per cent: 152.50 (152).



Tyre makers to raise prices again

yre manufactures may increase prices again due to the sharp rise in natural rubber (NR) prices. It will be the fourth increase in the current financial year. The quantum may vary from company to company but the range may be two-five per cent.
So far, in this financial year, prices of various types of tyres have gone up by 10-20 per cent on an average. The last increase was in December 2010, when prices were increased four-five per cent.
JK Tyres, a leading tyre manufacturer. has decided to increase prices by two-four per cent from next week. So far the company has increased prices three times this financial year.
A S Mehta, director (marketing) of the company told Business Standard the company would increase prices next week and monitor the market closely. “We cannot enhance prices by 10 per cent at one go, so we decided to go for a two-four per cent increase now, watch the market and then decide on a further increase,” he said.
Increase in prices of synthetic rubber and crude oil was a concern and therefore there was no alternative, he added. Also, the reduction in import duty would not have much effect on the industry as availability of NR was a major issue, he said.
Other leading manufacturers will also go for a rise in prices, not only in the original equipment segment but in replacement segment also. Rubber was at Rs 225 a kg today, an all-time high. According to Satish Sarma, chief, India operations, Apollo Tyres, “Prices will be increases in this quarter itself, but the quantum of increase is yet to be decided. It is very difficult to say anything about the quantum of increase right now since we have to take into consideration a lot of factors other than the increase of natural rubber prices. It is definite that prices will go up shortly.”
Apollo Tyres has increased prices three times in this financial year and the cumulative average increase has been 10 per cent, according to him.
Rajiv Budhraja, director general of the Automotive Tyre Manufacturers Association (Atma), said tyre companies were finding it difficult to cope with the daily increase in prices of rubber. As global prices are higher than the local ones, the reduced import duty is also not helping them. The availability of rubber in the global markets was a serious concern rather than appreciating prices, he said. Atma will approach the government and inform them about the grave situation.



Spot rubber hits Rs 225/kg

Spot rubber prices hit another historic high on Monday. The market was led by the bullish international prices and strong local demand. According to dealers, arrivals were still low and the absence of quantity sellers kept buyers on their toes throughout the session. The market is expected to resume the upward journey in the days ahead, they added.
Tyre makers bought natural rubber at Rs 225 a kg but they failed to procure the desired quantity . “As the releases to the market are very negligible, the consuming industry is compelled to purchase rubber at higher rates. Farmers are holding stocks expecting domestic prices to come at par with the global market,'' Mr George Valy, President, IRDF told Business Line. Sheet rubber flared up to Rs 226 (222) a kg, according to traders. The grade improved to Rs 225 (223) a kg both at Kottayam and Kochi, as quoted by the Rubber Board.
The February series for RSS 4 slipped to Rs 228.94 (229.91), March to Rs 233.90 (235.60) and April to Rs 243 (244.14) while the March series concluded its debut trading at Rs 249.01 a kg on the National Multi Commodity Exchange.
RSS 3 (spot) firmed up to Rs 251.91 (247.34) a kg at Bangkok. The January futures for the grade increased to ¥ 453.5 (Rs 249.90) from ¥447.9 a kg on the Tokyo Commodity Exchange.
Spot rates were (Rs/kg): RSS-4: 226 (222); RSS-5: 217 (212); ungraded: 209 (206.50); ISNR 20: 219 (217) and latex 60 per cent 152 (151).



Another bullish week ahead for rubber market

KUALA LUMPUR: The Malaysian rubber market is set to ride another bullish week with prices continuing to remain at a high level on concerns over the tight supply conditions globally.
The tyre-grade SMR 20 last Friday hit 1,600 sen per kg, the highest level ever since it was introduced in 1972, as Singapore and China car makers continued to place orders despite higher prices.
“Even with the current high prices, traders are still buying, due to improved car sales. This scenario will lead to even higher prices at a time when supply has remained thin, especially, with the onset of the wintering season,” the dealer highlighted.
The wintering season in the major producing countries will force tapping to be deferred as trees produce less latex during this period.
The wintering season is expected to continue until April.
On a Friday-to-Friday basis, the Malaysian Rubber Board's official physical seller price for tyre-grade SMR 20 surged 40.5 sen to 1,593 sen per kg from 1,552.5 sen previous week.
Latex in bulk rose 19.5 one sen at 1,004.5 sen per kg from 985 sen previously.
The unofficial seller closing price for tyre-grade SMR 20 rose 48.5 sen to hit 1,600 sen per kg from 1,551.5 sen previous week, while latex in bulk increased to 25.5 sen to 1,008 sen per kg from 982.5 sen previously.



Bicycle prices set to rise by 5-7% from Feb

Bicycle is now going to be costlier from February. Bicycle makers have decided to raise prices by 5 to 7 per cent in view of rising input, especially steel and rubber.
"We are going to increase prices of bicycles by 5 to 7 per cent because of unimaginable increase in input prices like steel, rubber etc," Ludhiana-based Avon Cycles MD Onkar Pahwa told PTI today.
Bicycle makers will be raising the prices with effect from February and they have started asking their retailers to raise rates accordingly.
"We will not be raising bicycle rates at one go. Rather, first we will increase rates by Rs 60-65 per bicycle from February 1 and then another similar hike will be made from February 15 in bicycle prices," said Pahwa.
Another prominent bicycle maker Safari Group will also be raising the rates by Rs 65 to Rs 100 per bicycle, across the models from next month.
"We have asked our retailers to raise rates of bicycle from February by Rs 65 to Rs 100 depending on models," Safari Group MD RD Sharma said.
With the sudden increase in steel prices coupled with consistent rise in rubber, nickel, the input cost has gone up by Rs 100-150 per bicycle, which has hit the wafer-thin margin of the industry hard.
"We have seen huge spurt in prices of steel, nickel, copper, zinc, rubber... Which has increased the input cost by over Rs 100 per bicycle," country's leading bicycle maker Hero Cycles Director SK Rai said while adding that it was yet to decide on how much cost to be passed on to customers.
Stating that the bicycle is a price-sensitive item, he said that bicycles are mainly meant for poor people who could not afford any other transportation mode.
According to bicycle makers, prices of steel, which is a key input in bicycle making, has shot up by Rs 32 to Rs 35 per kg in the last one month. Natural rubber prices have jumped by almost 25 per cent in past three months to Rs 210 per kg.
Besides, increase in nickel and copper rates have also hit the bicycle cluster.
Country's bicycle production is estimated at 1.30 crore per annum with Ludhiana being the oldest cluster for it, having 70 to 80 per cent of share in the total production.



Manufacturers raise prices as input costs surge

A growing number of North American industrial companies are pushing up prices – and warning of further increases to come – in the wake of fast-rising raw material costs.
John Byrne, director of common commodities at Boeing, the aircraft maker, which is the US’s leading exporter, said: “Any time you have raw material price increases, it ripples through the whole system.”
Chris Liddell, General Motors’ chief financial officer, said at the Detroit car show last week: “We’ve got cost pressures all around.” Lewis Booth, his counterpart at Ford Motor, said the number-two Detroit carmaker expected a steady rise in fuel prices.
David Leiker, automotive analyst at RW Baird, said his clients were asking increasingly about the impact of rising commodity prices on the profitability of car industry suppliers. Mr Leiker estimated that raw materials made up about $3,500 of a car that sells for $28,000.
The biggest items are steel (an average of 2,100lb), aluminium (400lb), plastic (250lb), rubber and glass.
Goodyear raised tyre prices by up to 8 per cent last October, and rubber prices have climbed to new records since then. The company said when it published third-quarter earnings that it was “aggressively” substituting natural with synthetic rubber.
Mr Leiker said: “The issue is how much of a lag is there between absorbing the higher costs and seeing the offset in margins at the suppliers.”
Pat Campbell, chief financial officer at 3M, said last month: “We’re going to have to be more aggressive in the marketplace going after price ourselves...We have businesses that are up 10 per cent on raw material costs and they obviously have to do more on price.”
3M makes an array of products from Scotch tape and Post-it notes to electronic components and street signs.
Mr Leiker noted that materials were usually bought under long-term supply agreements, limiting price volatility. Some big manufacturers responded to volatile commodity prices in 2007-8 by stepping up hedging and insisting on more robust provisions in supply contracts to ensure their production plans were not harmed by dramatic price increases.
John Deere, the world’s biggest tractor maker, expects raw material and logistics costs to be $250m higher this year compared with 2010.
Along with other manufacturers of heavy duty equipment, such as Caterpillar and Agco, John Deere is implementing significant price increases, although much of that reflects the extra cost of vehicles designed to meet stricter emissions regulations.
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