Rubber, palm oil prices to ease

Rubber, palm oil prices to ease

Experts say the surging prices of rubber and palm oil could ease in the coming months, although healthy demand will keep the overall trend above last year's level.
Pranart Pipithkul, an economist with the Office of Agricultural Economics, named the recent floods that reduced the plantation area of rubber trees as the main reason for the jump in rubber prices.
The price of rubber sheet will grow increasingly volatile this year in line with seasonal factors and changing demand.
Prices will likely decline in March and April based on seasonal declines in demand before picking up in May and June on inventory stockpiles.
Production will increasingly slow down in February, March and April prior to the expected May price increase, said Ms Pranart. The rubber sheet price will also move in line with the oil price.
The rubber sheet price is expected to average 115-120 baht a kilogramme this year, up from 102 baht last year. It soared by 23% from 130 baht a kilogramme in mid-December to 160 baht last Thursday.
Praneet Chotikirativech, senior director of the Bank of Thailand's Southern Region Office, said the floods and heavy rains reduced rubber sheet production by a third, driving up the price.
The high price boosted the economies in dense plantation areas such as Surat Thani, Nakhon Si Thammarat and Songkhla provinces.
Mr Praneet said southern farmers enjoyed an average income increase of 60% last year against a 30% decline in 2009, mostly from rubber and palm oil.
The floods and heavy rains subsided this month, but rubber sheet remains in short supply worldwide. The weather change has also caused rubber plants to shed their leaves, preventing cutting, said Mr Praneet.
He said the palm oil price had also spiked to a record high of nine baht a kilogramme, from 6.50 baht last year.
The price mainly tracks that of petrol since it is used in biodiesel production but has increased significantly due to a shortage. It will likely ease in the coming months.
The central bank said in a report that the International Rubber Study Group (IRSG) expects world production of rubber to stand at 11 million tonnes, with Thailand ranking tops in terms of volume at 3.4 million tonnes, followed by Indonesia (three million), Malaysia (one million) and India (910,000).
The group expects China's rubber demand to keep rising in line with its plan of becoming a major automotive manufacturing centre over the next decade with annual production capacity of 30 million cars, up from 17 million now.
The central bank report said the weather change prohibiting rubber tree cutting is an upside opportunity for the price. However, the downside risk is Bridgestone's technology that demands less use of natural rubber in tyre manufacturing in favour of synthetic rubber.



Rising rubber prices hitting Punjab Inc

CHANDIGARH: Turbulent rubber prices are giving jitters to industry. For the last two years, prices of rubber have shown undue turbulence. The prices have gone up from under Rs 100 per kg to over Rs 245 per kg. The prices of rubber have gone up by 63% in 2010. Punjab has wider use of rubber for industrial production. India is the fourth largest producer of natural rubber and second largest consumer in the world after China.
Rough estimates suggest that Punjab’s industry uses more than 12% of the total rubber in the country. Jalandhar being the hub of rubber footgear production and with unexpected upsurge in the rubber prices, this vital industry is almost on the verge of extinction. As of now, only 100 odd units in Punjab are struggling for survival. Cheap products from China have further contributed to this catastrophe.
“Undue restrictions are responsible for unbridled rise in the prices. Natural rubber is erroneously being taken as agricultural commodity, whereas, it is an industrial raw material,” says APEX chamber of Commerce president P D Sharma.
Industry mavens feel that cess of Rs 1.5 per kg needs to be removed and natural rubber should be freely allowed to be imported to the country with a certificate from approved laboratory along with the consignment to certify the quality of natural rubber imported.



Tokyo rubber futures near two-week low

Bangkok (january 27, 2011) : the key tokyo rubber futures contract fell to its lowest in nearly two weeks on wednesday as broad weakness in commodity markets triggered profit-taking as players feared that prices had risen too fast, dealers said. the benchmark rubbercontract on the tokyo commodity exchange for july delivery, which made its debut on wednesday, fell 3 yen from the opening price to settle at 457.2 yen ($5.56) per kg, the lowest for a benchmark since january 14.
the previous benchmark june contract fell as much as 16.5 yen, or 3.4 percent, to finish at 460.1 yen per kg. the most active rubber contract on the shanghai futures exchange for may deliver fell 385 yuan to settle at 39,280 yuan ($5,967) per tonne. deliveries against the january rubber futures contract, which expired on tuesday at 478.2 yen, stood at 314 lots or 1,570 tonnes, more than double december's deliveries.



Rubber surge hits footwear industry in India’s Punjab

JALANDHAR (Commodity Online) : The footgear industry in Jalandhar in the Indian State of Punjab is getting jitters with rubber prices in the country heading north.
The price of natural rubber, previously traded for Rs.100/kg now hovers around Rs.245 a kilogram. In 2010 alone, the price surged by 63%. The footwear industry bemoans the price surge where 100 odd units are struggling for survival.
Punjab’s industry has stretched the consumption of rubber to 12% of total rubber produced in the country.
India is the fourth largest producer of natural rubber and the second biggest consumer of the same. China ranks first in rubber consumption.
The restrictions in place for natural rubber import and exports have unnecessarily pushed the prices up, industry players feel. They also give thumbs down to Rs.1.5 cess on rubber.
They believe that rubber should be classified as an industrial raw material rather than an agricultural commodity.



Price of rubber doubled last year

The price obtained from rubber production has doubled from year 2009 to 2010, according to the Ministry of Plantation Industries.
“The price of one Kg of rubber on average in 2009 was Rs.202.79 but in 2010 it was Rs. 402.75,” Minister of Plantations industries Mahinda Samarasinghe said.
He said rubber production had also increased from 137,000 metric tonnes in 2009 to 150,000 metric tonnes in 2009. In certain instances the price goes up to Rs. 570 or 580, he added.
However the Minister was unclear on the figures of how much loss the industry incurred due to the inclement weather conditions in the past months. He stated that at present demand overrode the necessary supply and expressed his hope that local produce could fulfill the total requirement needed for the production of value added rubber products.



Auto Cos May Import Tyres to Meet Shortfall in India

For customers looking at early car deliveries in 2011 may have to wait a little longer, as manufacturers facing severe tyre shortages in local market are now hunting in China, Thailand, Korea and Malaysia to meet their new production targets. Car companies are looking at importing tyres to make up for the shortages that are affecting their 2011 production plans.
Already facing component shortages that led to lower production for most car companies in 2010, major carmakers like Maruti Suzuki India , Tata Motors and Hyundai Motors are planning import of tyre, anticipating a 25% increase in production in 2011 from the 28.14 lakh cars produced in 2010 calendar year.
Indian carmakers claim that tyre shortages in the domestic market have forced them to venture overseas, as the local manufacturers couldn’t meet their required demand.
“Inconsistent supply of tyre has hampered production for the major part of 2010. Keeping in view the higher production targets of 2011, we have planned tyre purchase overseas markets for meeting our long-term commitments, as we aim a 14-lakh units production in next fiscal ,” said a senior executive of Maruti Suzuki, who preferred not to go on record.
Shortages for tyres come as carmakers are already at loggerheads with component suppliers with shortages of several critical parts affecting production. Carmakers say that sufficient component supply would have helped them to produce 20% more cars in 2010. Lower production has led to long waiting period of up to 4-5 months on many popular cars like the Maruti Swift, Volkswagen Polo, Toyota Innova.
Taking contingency measures, the Indian car industry that consumed over 10 million tyres in 2010 feels that supplies of tyres in the domestic market could fell short by around 10% of their demand and wants to fill their gap by imports. There are many factors which have affected auto production in India. While components were in short supply as demand peaked in the past few months, we do not anticipate an immediate solution in the shortterm and availability of tyres is a matter of concern,” said Pawan Goenka, president, Society of Indian Automotive Manufacturers , who also head automaker Mahindra & Mahindra Ltd.
The decision of carmakers comes after major truck and bus manufacturers like Tata Motors and Ashok Leyland are already importing tyres from China and Thailand to offset shortages in the domestic market. While shortages has been a long-drawn issue, the abnormal increase in prices of raw material prices in 2010 created several production problem to the Indian tyre sector. The increase in natural rubber prices that currently peaked to. 207/kg has forced domestic tyre companies to divert more supplies to used market that fetch higher margins.
Typically most tyre companies supply 60-65 % production to carmakers and the rest is targeted to after market, but in 2010 on the back of spiralling production cost, most tyre players restricted supplies to carmakers to 50% of their production. Automotive Tyre Manufacturers’ Association says that supplies is a commercial decision and despite facing tougher times, Indian tyre industry is increasing production capacities that would facilitate high availability in coming months.
“Keeping in view the buoyant market, several tyre companies are investing into new capacities that would cater to the increased demand . While current production is also adequate for the domestic automakers, importing tyres from overseas markets could also be a commercial decision, as some of the imported tyres are cheaper than the Indian ones,” ATMA director general Rajeev Budhiraja said.
(The Economic Times, India, January 27, 2011)



China CPCIF suggests regulating rubber prices to rescue tire industry

BEIJING, Jan 26, 2011 (Xinhua via COMTEX) --
China Petroleum and Chemical Industry Federation (CPCIF) has called for regulatory measures taken by related authoritative departments on natural rubber prices in a bid to ease tire industry's cost pressure including selling of reserve rubber, and cut or cancellation of import tax.
Since the fourth quarter of last year, domestic natural rubber prices have been rising persistently and have already topped 40,000 yuan/tonne. With soaring rubber prices, the downstream tire industry has incurred losses on the whole.
Decreasing self-sufficiency of natural rubber is a key reason to trigger price rise. In 2005, the self-sufficiency rate dived under the internationally recognized security line of 30 percent, and continued to remain at low levels in the following years, 25 percent in 2007, 22 percent in 2009 and likely 20 percent in 2010.
CPCIF held that cost pressure, demand expansion and adverse weather are three factors to prop up prices of natural rubber.
As natural rubber prices are rising crazily, tire industry will suffer losses and the downstream automobile and machinery industries are expected to be affected given the 20 percent of import tax rate on prices and 2,000 yuan/tonne on volume, many tire enterprises said.
In the short term, rubber prices can only be stabilized by selling state stockpiles and removing import tariff, an unnamed industry noted. (Edited by Liu Xiaoyun, liuxy08@xinhua.org)
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Rubber Demand to Grow 4.6% in 2011, Outpace Supply, Group Says

Natural rubber demand may grow 4.6 percent this year, boosted by strong vehicle sales, with consumption continuing to outpace supply in coming years, according to the International Rubber Study Group.
Global consumption may gain to 11.2 million metric tons in 2011 and 11.6 million tons next year, said Stephen Evans, the group’s secretary general. The supply deficit will support prices of the commodity used to make tires and gloves, he said.
Rubber gained to a record this week, extending a 50 percent advance in 2010, as rising car sales led by China and India boost demand, and rains disrupted tapping in key growing nations ofSoutheast Asia. Natural rubber demand in China, the biggest consumer, may rise 9 percent this year, said the Association of Natural Rubber Producing Countries.
“From the fundamental point of view, we don’t see relief coming in the next few years because of over-demand and undersupply,” said Evans. “The price is likely to stay firm,” he said.
Demand may rise further to 13.1 million tons in 2015 and 15.4 million tons in 2020, while production may be about 13.8 million tons, said Evans. The estimates are based on normal production conditions, excluding a potential increase in supply from new plantings and increased tapping driven by high prices, he said.
Above-average rain from a La Nina weather event has curbed output in Indonesia, Malaysiaand Thailand, the biggest producer. The weather pattern may last until the middle of the year, causing higher-than-usual rainfall in Thailand during January to April, the Thai Meteorological Department has said.
Further Tightness
“If the demand stays strong, we’ll see further tightness in the market,” Evans said. Still, it isn’t “worrisome, as high prices will encourage tappers,” he said.
The most-active contract on the Tokyo Commodity Exchange gained as much as 3.2 percent today to 474.8 yen per kilogram ($5,725 a ton).
Futures fell 4.6 percent in the past two days after reaching a record 484.9 yen on Jan. 24 on worries China may take additional steps to curb inflation, reducing demand. China raisedinterest rates twice in the fourth quarter in a bid to choke off inflation.
“In the fast-moving economy like China, even a significant move may not be enough to slow it down,” Evans said. “There is no fundamental evidence that demand will go off a cliff.”
Natural rubber consumption in China may rise to 3.6 million tons this year and India’s consumption may gain 5.2 percent to 991,000 tons, according to the Association of Natural Rubber Producing Countries.
China Growth
China’s economy grew 10.3 percent in 2010, the fastest pace in three years and up from 9.2 percent a year earlier, the government said this month. China’s vehicle sales may grow 10 percent to 15 percent this year after jumping 32 percent to 18.06 million vehicles in 2010, according to a forecast by the China Association of Automobile Manufacturers.
Natural-rubber supply from members of the Association of Natural Rubber Producing Countries, which represent 92 percent of global supply, may expand 4.8 percent this year to about 9.9 million tons, the group said Jan. 25. The forecast is lower than an “optimistic target” by member governments of 7.7 percent growth to 10.2 million tons, it said.
The International Rubber Study Group counts 16 countries plus the European Union as members, according to its website. Thailand and Malaysia, the world’s largest and third-largest producers, are part of the group, while Indonesia, the second- largest grower, is not.