Mixed trend in rubber

Mixed trend in rubber


Kottayam, Jan. 24

Spot rubber showed a mixed trend on Monday. The market failed to react in tune with the global gains on buyer resistance. Though the sentiments were partially affected by a weak closing on the NMCE, certain grades ruled firm with marginal gains on comparatively better demand.

The argument about globalisation was that the farmers in India would get the same benefits as their counterparts in other countries. Now when the price goes up in favour of farmers, how could it be denied to them, asked Mr Joy Nadukkara, Ex. MP and President, Meenachil Rubber Marketing and Processing Cooperative Society Ltd.

The price in the international market still remains about Rs 25 a kg above the domestic price. It is true that higher the prices, more are the reverses which would harm the industry in the long run. But attempts to deny higher prices to the farmers could not be justified under any circumstances, he said.

Sheet rubber closed flat at Rs 235 a kg according to traders. The grade firmed up to Rs 235 (234) a kg both at Kottayam and Kochi as per Rubber Board. RSS 4 declined at its February series to Rs 235.05 (239.21), March to Rs 241.21 (245.29), April to Rs 249.11 (253.24) and May to Rs 254.70 (259.52) a kg on the National Multi Commodity Exchange (NMCE).

RSS 3 (spot) improved to Rs 266.61 (261.87) a kg at Bangkok. The January futures for the grade moved up to ¥483.2 (Rs 266.06) from ¥476.5 a kg during the day session and then to ¥484 (Rs 266.58) in the night session on the Tokyo Commodity Exchange (TOCOM). Spot rates were (Rs/kg): RSS-4: 235 (235); RSS-5: 226 (225); ungraded: 220 (220); ISNR 20: 227 (226) and latex 60 per cent: 155 (155).



Rubber Supply Stretched Tight

The booming global automobile sector - especially in countries such as China and India - has accelerated demand for tyres. But the world's natural rubber supply is likely to remain tight for the next two years due to a lower yield from major producing countries such as Thailand.
The Association of Natural Rubber Producing Countries (ANRPC) estimated natural rubber supply increased by 6.3% to touch 9.4 million tonnes during 2010, but expects a drop in production from Thailand this year due to an extended winter and unpredictable rains. Production in Indonesia also dropped for this harvest due to unusual rains.
Still, the global rubber supply in 2011 is expected to equal last year's total due to the chance of increased output in many major growing countries, said Jom Jacob, senior economist at the ANRPC.
Thailand is planning to reduce its rubber plantations by 815,000 hectares in the South to grow oil palm trees. It will expand rubber plantations in the North and Northeast by 870,000 hectares. A shift in the supply curve is expected from 2012 due to the new planting areas reaching the yielding stage, said Mr Jacob.
He expects the impact of supply from such a large area to be partly offset by uprooting of old rubber trees in all major producing countries.
Labour availability and climate are the two main risk factors for rubber supply. Delay in replanting due to current high prices and crop expansion in non-traditional areas where yield will be lower are factors to watch out for in the near future, said ANRPC secretary-general Djoko S. Damardjati.
Inappropriate planning for synthetic rubber production is also making the situation tight, said Stephen Evans, the secretary-general of the International Rubber Study Group (IRSG). Globally, a shortfall is being reported in the production of butadiene, an important industrial chemical used as a monomer in the production of synthetic rubber.
India imports more than 80% of its synthetic rubber. The Rubber Board of India reported the share of natural rubber in automobile tyres is 73% and synthetic only 27%. Globally, synthetic rubber averages 56% composition in tyres against 44% natural rubber.
The IRSG said during 2010, natural rubber demand stood at 10.3 million tonnes while synthetic was 13.6 million tonnes. Rising crude oil prices have been a major factor in the production and consumption of synthetic rubber as it is mostly produced from the cracking of feedstock naphtha.
"Indian synthetic rubber production is non-existent, unlike China that has strategically built up huge capacities. In the past five years, India has only added 0.5 million tonnes of synthetic rubber production capacity," said Mr Evans.
India's monthly production of synthetic rubber totals around 8,000 to 9,000 tonnes against demand of 30,000 to 33,000 tonnes. "Based on the recent market experience of petrochemical cracker diets going light, butadiene supply will be constrained," he added.
The quantity of butadiene produced depends on the hydrocarbons used as feed. "The discovery of cheaper natural gas like shale gas in the United States has led to less production of butadiene as a byproduct. Most plants in the United States are flexible enough to switch quickly," said Mr Evans.
The supply of butadiene in the United States has been light the last two years. Europe, Canada and China are also trying the new cheaper and abundant shale gas. More countries adapting to the new feedstock will mean less butadiene.
India's natural rubber production ranking is being challenged by Vietnam. India's share as a percentage of total planted area of the ANRPC has remained almost the same from 2005 (7.5%) to 2009 (7.8%).
IRSG officials estimate rubber demand in 2010 to touch 23.9 million tonnes, growth of 12.9% over the previous year. In 2011, demand is estimated at 25.5 million tonnes with growth of 6.7%.
India's automotive market gained momentum the past two years as the country rode strong economic growth despite a global slump. Rising disposable incomes, easier access to consumer credit, plenty of product action and some aggressive discounting by manufacturers have jumpstarted car sales.
The Society of Indian Automobile Manufacturers said 12.29 million vehicles were sold from April 2009 to March 2010. This included passenger vehicles, commercial vehicles, three-wheelers and two-wheelers.
China's tyre industry is also finding it hard to cope with higher rubber prices.
The Global Times, a subsidiary of the People's Daily, quoted Deng Yali, vice-chairman of China Rubber Industry Association, as saying rubber prices rose more than 80% in 2010, cutting into manufacturer profits. The report also states China uses one-third of the 9 million tonnes of rubber used worldwide on a yearly basis.
Chinese consumer tyre exports to the United States totalled 31.1 million units in 2010, down from 43 million in 2009, according to reports.



Malaysia to Cut Middlemen Out of Rubber Trade

The government of Malaysia plans to increase profits for rubber small holders by implementing various initiatives, including reducing the role of the middleman.
Rural and Regional Development Minister Datuk Seri Shafie Apdal said with the current price of rubber at RM16.29 per kilo, small holdings could only take in half the amount as they depended on middlemen.
He said the ministry also plans to establish factories to process rubber in holdings that are 5,000ha or bigger.
Shafie said this after presenting aid to repair old houses in Kampung Lembah Bakti here yesterday (January 23).
On another matter, Shafie said the ministry had spent RM431.6mil in repairing and building more than 16,000 houses in rural areas nationwide last year under the House Assistance Programme (PBR).
He said the government has allocated RM300mil to help 9,146 families this year in repairing their houses.



La Niña is a danger to the economic recovery

The increasing price of commodities is causing input costs all over the world to rise and there's a real danger this could derail the tentativeeconomic recovery in the west.
Worse still, it could cripple emerging markets that are now the world's engine of growth. And a lot of it is down to the action of a "little girl".
The La Niña weather phenomenon – little girl in Spanish – is causing havoc all over the world as it destroys crops and floods mines. It has already hit the price of coal, rubber, soybeans, palm oil and wheat – and the phenomenon is expected to last until at least April.
La Niña is a weather event that sees surface waters in the central and eastern Pacific Ocean cool. This brings heavy rainfall to places such as Australia, Indonesia, Brazil and Colombia – and causes dryness in California and the southern US.
La Niña is a regular and predictable event. Unfortunately, this year it is much worse than normal.
"The solid record of La Niña strength only goes back about 50 years and this latest event appears to be one of the strongest ones over this time period," Bill Patzert, a climatologist at NASA's Jet Propulsion Laboratory in California said. Dr Rob Allan, a scientific manager at the Met Office, agrees. He even raises the prospect of a "double event".
"The average lifecycle of La Niña indicated that there are a few months left to run – but it is not unknown that it can carry on for much longer." However, current models suggest that the weather system will weaken in the coming months.
The most high profile event hitting business has been the devastating floods in Queensland, Australia, which have washed away infrastructure and closed mines. They have resulted in A$2.3bn (£1.4bn) of lost coal sales for the mining industry, according to the Queensland Resources Council. This sent the spot price of coking coal soaring to as high as $370 a tonne, significantly higher than the first quarter contract price of $225.
This is bad news for steel makers, which were already suffering from a jump in the price of iron ore. Steel prices have been forecast to rise and steel groups had been hoping to see an increase in margins this year. The floods may have put paid to that.
BHP Billiton has said that its coal production slumped by 30pc in the final quarter of last year, although stockpiles across its supply chain meant that sales were only hit by 15pc.
Perhaps the most worrying aspect for chief executives of mining companies is the prospect of emergency taxation to bolster reconstruction efforts in Australia. Most miners have seen their cashflows boosted significantly by rising commodity prices and they successfully battled plans for a new supertax on mining profits in Australia last year. If a new reconstruction tax is introduced, it is likely the government will win that battle as it will have the moral high ground.
But it is not just miners that could see their finances hurt by La Niña weather patterns. The weather has hit agriculture hard in Asia – and prices of products used in manufacturing such as rubber and palm oil have been on the rise.
On Friday, rubber futures hit an all-time high after La Niña floods in Thailand caused a shortage. Thailand is the world's largest exporter of rubber, which is used in a wide variety of manufacturing processes. Demand for rubber from China and India's carmakers has been particularly strong. The weather in the southern rubber-producing states is expected to worsen.
Rains in Brazil have hit crop production – and even the price of fruit is expected to soar in the country, which is battling significant inflation. In Sao Paulo, lettuce, broccoli, watercress and cauliflower production have reportedly fallen by 20pc, prompting a 60pc rise in vegetable prices.
Inflation is a real threat to the global economy and concerns are mounting that central banks may have to increase rates earlier than they wanted – putting the recovery at risk.
This little girl could have a very big impact over the next few months. GW
Ivory Coast worries drive cocoa to five-month high
Cocoa prices are expected to surge today after the Ivory Coast’s president-elect, Alassane Ouattara, imposed an export ban on the commodity.
The price last week rose almost 8pc to $2,150 (£1,340) per tonne in London – a five-month high – on concerns about political unrest in the country, the world’s largest grower of beans.
There has been turmoil in the West African country since a disputed election in late November, but the supply of cocoa has not yet been affected. However, traders will now be expecting a jump in the cocoa price after Mr Ouattara, the internationally recognised winner of the elections, sent a letter to leading cocoa exporters yesterday ordering them to stop overseas shipments until February 23 in an attempt to oust incumbent Laurent Gbagbo.
According to forecasts by Macquarie, Ivory Coast’s harvests will be up 1.9pc from last year, so the market was expecting to be well supplied.
Traders had said there were no fundamental cocoa supply problems and believed a rush of fund buying had boosted the price.
Now, any reduction in supply is likely to push the price towards a 33-year high, since the Ivory Coast accounts for about 40pc of global cocoa exports.
Exports could stop today and all eyes will be on attempts by industry bodies to coordinate traders’ efforts. RM
Oil slides lower
Amid a general correction in the commodities market, Brent crude oil slipped as low as $95.5 per barrel at one point last week, having hovered nearer the $100 per barrel mark for the last few weeks.
In America, West Texan Intermediary dropped as low as $88, with the spread between the two widening.
Inventories of oil are rising across the US and it appears that worries about the dollar are the main driver supporting crude at its current price



Rubber supply stretched tight

The booming global automobile sector - especially in countries such as China and India - has accelerated demand for tyres. But the world's natural rubber supply is likely to remain tight for the next two years due to a lower yield from major producing countries such as Thailand.
The Association of Natural Rubber Producing Countries (ANRPC) estimated natural rubber supply increased by 6.3% to touch 9.4 million tonnes during 2010, but expects a drop in production from Thailand this year due to an extended winter and unpredictable rains. Production in Indonesia also dropped for this harvest due to unusual rains.
Still, the global rubber supply in 2011 is expected to equal last year's total due to the chance of increased output in many major growing countries, said Jom Jacob, senior economist at the ANRPC.
Thailand is planning to reduce its rubber plantations by 815,000 hectares in the South to grow oil palm trees. It will expand rubber plantations in the North and Northeast by 870,000 hectares. A shift in the supply curve is expected from 2012 due to the new planting areas reaching the yielding stage, said Mr Jacob.
He expects the impact of supply from such a large area to be partly offset by uprooting of old rubber trees in all major producing countries.
Labour availability and climate are the two main risk factors for rubber supply. Delay in replanting due to current high prices and crop expansion in non-traditional areas where yield will be lower are factors to watch out for in the near future, said ANRPC secretary-general Djoko S. Damardjati.
Inappropriate planning for synthetic rubber production is also making the situation tight, said Stephen Evans, the secretary-general of the International Rubber Study Group (IRSG). Globally, a shortfall is being reported in the production of butadiene, an important industrial chemical used as a monomer in the production of synthetic rubber.
India imports more than 80% of its synthetic rubber. The Rubber Board of India reported the share of natural rubber in automobile tyres is 73% and synthetic only 27%. Globally, synthetic rubber averages 56% composition in tyres against 44% natural rubber.
The IRSG said during 2010, natural rubber demand stood at 10.3 million tonnes while synthetic was 13.6 million tonnes. Rising crude oil prices have been a major factor in the production and consumption of synthetic rubber as it is mostly produced from the cracking of feedstock naphtha.
"Indian synthetic rubber production is non-existent, unlike China that has strategically built up huge capacities. In the past five years, India has only added 0.5 million tonnes of synthetic rubber production capacity," said Mr Evans.
India's monthly production of synthetic rubber totals around 8,000 to 9,000 tonnes against demand of 30,000 to 33,000 tonnes. "Based on the recent market experience of petrochemical cracker diets going light, butadiene supply will be constrained," he added.
The quantity of butadiene produced depends on the hydrocarbons used as feed. "The discovery of cheaper natural gas like shale gas in the United States has led to less production of butadiene as a byproduct. Most plants in the United States are flexible enough to switch quickly," said Mr Evans.
The supply of butadiene in the United States has been light the last two years. Europe, Canada and China are also trying the new cheaper and abundant shale gas. More countries adapting to the new feedstock will mean less butadiene.
India's natural rubber production ranking is being challenged by Vietnam. India's share as a percentage of total planted area of the ANRPC has remained almost the same from 2005 (7.5%) to 2009 (7.8%).
IRSG officials estimate rubber demand in 2010 to touch 23.9 million tonnes, growth of 12.9% over the previous year. In 2011, demand is estimated at 25.5 million tonnes with growth of 6.7%.
India's automotive market gained momentum the past two years as the country rode strong economic growth despite a global slump. Rising disposable incomes, easier access to consumer credit, plenty of product action and some aggressive discounting by manufacturers have jumpstarted car sales.
The Society of Indian Automobile Manufacturers said 12.29 million vehicles were sold from April 2009 to March 2010. This included passenger vehicles, commercial vehicles, three-wheelers and two-wheelers.
China's tyre industry is also finding it hard to cope with higher rubber prices.
The Global Times, a subsidiary of the People's Daily, quoted Deng Yali, vice-chairman of China Rubber Industry Association, as saying rubber prices rose more than 80% in 2010, cutting into manufacturer profits. The report also states China uses one-third of the 9 million tonnes of rubber used worldwide on a yearly basis.
Chinese consumer tyre exports to the United States totalled 31.1 million units in 2010, down from 43 million in 2009, according to reports.



Rubber Board to approach Maharashtra for GM rubber field trials

The Rubber Board plans to soon approach the Maharashtra Government to hold field trials of genetically-modified (GM) rubber.
“The Kerala Government is in-principle opposed to GM crops. Therefore, we plan to approach the Maharashtra Government, to allocate a plot for us for planting GM rubber,” said Mr Toms Joseph, Deputy Director (Economic Research) of the Rubber Board. The Kerala Agriculture Minister, Mr Mullakara Ratnakaran, a couple of months back wrote a letter to the Union Environment and Forests Minister, Mr Jairam Ramesh, opposing the clearance given by the Genetic Engineering Appraisal Committee (GEAC) for field trials.
His opposition was on the grounds that it would have an adverse effect on the ecosystem.
In his reply, Mr Ramesh said that without field trials, it would not be possible to ascertain any adverse effects to the ecosystem from GM rubber.
The Rubber Board has been given the go-ahead to hold field trials by the GEAC.
“We have been told that the permission has been given and we are waiting for the letter,” said Mr Joseph on the sidelines of the India Rubber Expo 2011.
The GM rubber plant, in which MnSOD gene, taken from rubber tree itself has been incorporated, is resistant to drought and stress.
Suitable place
It can withstand higher temperatures and can be introduced in Maharashtra where the temperature is higher than in Kerala that accounts for over 95 per cent of natural rubber grown in the country.
“The yield and other characteristics will be clear during the field trial,” Mr Joseph said. The development of GM rubber is significant in the wake of weather change affecting rubber production.
During the current fiscal, rubber production was estimated to increase to 8.93 lakh tonnes (lt) from 8.31 lt last year.
However, with weather playing truant during September-October, it has been pruned to 8.51 lt.



Ministry to cut middlemen out of rubber trade

LABIS: The government plans to increase profits for rubber small holders by implementing various initiatives, including reducing the role of the middleman.
Rural and Regional Development Minister Datuk Seri Shafie Apdal said with the current price of rubber at RM16.29 per kilo, small holdings could only take in half the amount as they depended on middlemen.
He said the ministry also plans to establish factories to process rubber in holdings that are 5,000ha or bigger.
Shafie said this after presenting aid to repair old houses in Kampung Lembah Bakti here yesterday.
On another matter, Shafie said the ministry had spent RM431.6mil in repairing and building more than 16,000 houses in rural areas nationwide last year under the House Assistance Programme (PBR).
He said the government has allocated RM300mil to help 9,146 families this year in repairing their houses.