Kottayam, Jan. 4
Spot rubber prices recorded another high on Tuesday. Sharp gains on the Tokyo Commodity Exchange (TOCOM) futures and a positive mood on the National Multi Commodity Exchange (NMCE) catalysed domestic sentiments, while sellers stayed away expecting better rates in the days ahead. The market continued to experience an acute shortage of the raw material as growers still preferred to hold a major portion of their stocks. Though the change in weather was favourable for tapping, there has been no improvement in arrivals.
Sheet rubber increased to Rs 210 (208) a kg on fresh buying and short covering. The grade moved up to Rs 209.50 (207.50) a kg both at Kottayam and Kochi, according to the Rubber Board.
Futures firm
The January series closed at Rs 212.68 (211.71), February at Rs 219 (218.73), March at Rs 223.70 (223.59) and April at Rs 230.37 (229.63) a kg for RSS 4 on the NMCE.
RSS 3 (spot) firmed up to Rs 226.39 (224.07) a kg at Bangkok. Its January futures flared up to ¥416.2 (Rs 227.90) from ¥405.1 a kg during the day session and then to ¥418 (Rs 228.85) in the night session on the TOCOM.
Spot rates were (Rs/kg); RSS-4: 210 (208); RSS-5: 201 (200); ungraded: 197 (196); ISNR 20: 207 (205) and latex 60 per cent 142 (140).
Rise in spot rubber prices
On Monday (03 January 2011), the spot rubber prices firmed up further and hit another record high due to fresh buying and short covering. Though the market is passing through the peak production season, supply concerns continued to put pressure on the buyers. Sheet rubber increased to Rs. 208 from Rs. 206.50 per kg mainly on covering purchases.
The January futures for RSS 4 declined to Rs. 211.75 (211.78), while the February contract increased to Rs. 218.72 (216.94), March to Rs. 223.50 (221.34) and April to Rs. 229.76 (228.44) per kg on the National Multi Commodity Exchange.
Spot rates were (Rs/kg): RSS-4: 208 (206.50); RSS-5: 200 (199); ungraded: 196 (195); ISNR 20: 205 (204) and latex 60 per cent: 140 (138.50).
Rubber Board lowers production estimate
Earlier the board had projected production at 893,000 tonnes and consumption at 978,000 tonnes.
The Rubber Board revised production-consumption estimates for the current financial year in tune with the slow pace of growth recorded in December 2010. According to the revised estimates, the total annual production would be 851,000 tonnes against earlier year’s figure of 831,400 tonnes, rising 2.4 per-cent.The consumption estimates were lowered to 948,000 tonnes indicating growth of 1.9 per-cent only.
Estimates were lowered due to the latest negative growth trend in production and consumption. According to the board’s latest data, production in December increased marginally at 0.6 per-cent. Consumption had negative growth of 1.3 per-cent in the same month. This is for the first time in the current financial year that consumption registered negative growth. Hence the revision in the annual estimates.
Slow growth in production
Natural rubber [NR] production slowed down, signaling a rally in prices in the next quarter of FY11. Latest estimates of the Board revealed that the production in April-December period of FY11 increased 2.8 per-cent compared to the same period of the last financial year.
In April- November period, production increased 2.9 per-cent. in the coursework of April-October, production recorded an increase of 4.5 per-cent. Earlier much hope was placed on the production in December because October-December is the peak season in the rubber production cycle.
But, estimates indicate production has not peaked to the expected levels even in the time of very high cost band for the product. This, according to growers is due to continual rainfall in December that affected the tapping of rubber trees. A serious shortage for labourers, in small and medium plantations is also a serious concern in the case of NR production.
In April-December, the total production increased to 649,650 tonnes as against 631,750 tonnes in the same period of the last financial year. A steep fall is evident as production in the coursework of April-December was 694,315 tonnes when the average cost of benchmark grade RSS-4 was Rs 120 a kg. The increase recorded in the coursework of that period was 7.9 per-cent. Amidst the greatest rally on the cost front in 2010 (current cost is Rs 207), the increase in production is very narrow, leading to shortage in the coursework of the off season (March-May).
The sharp increase in prices in the coursework of this period tempted the farmers to tap the maximum with the existing trees. This will endanger the supply of the funds crop in the coming years the demand for rubber is on a rise across the world. Increase in the cost of synthetic rubber [SR] also adds much pressure on the cost line of NR.
Apart from the unfavourable climate, production was also affected by poor performance of re-plantation of aged trees in the coursework of the last three-four years.
The demand is expected to go beyond 1 million tonnes by 2012, but the progress in production does not match the increase in the usage.
The increase in the every month output in December was marginal at 0.6 per-cent. Production in December was 101,500 tonnes, compared to 100,850 tonnes in December 2009. Surprisingly, the data estimates a fall in consumption in the coursework of December by 1.3 per-cent.
Till November, consumption was increasing but December paints a different picture on national consumption. In December, consumption dropped to 77,500 tonnes, compared to 78,500 tonnes in the same month of 2009.
The stock position by the close of 2010 was 307,170 tonnes as against 269,740 tonnes as on December 31, 2009. The board clarified that about 65 per-cent of the stated stock is in the usable form by tyre companies, which is for more than seven months consumption. This indicates a squeeze in the actual stock in the country which will be yet another concern in the coming year.
Rubber output up in Dec; consumption drops 1.3%
Kochi Jan.3
The cumulative rubber production for April-December period, meanwhile, increased 2.8 per cent to 6,49,650 tonnes (6,31,750 tonnes). the cool news on the production front comes in the wake of record prices notched by natural rubber in both the domestic and international markets. The cool tidings is a shot in the arm for small growers who account for over 90 per cent of the country's rubber production.
Natural rubber production increased last month to 1,01,500 tonnes as against 1,00,850 tonnes in December last year. The increase in production was due to favourable climatic conditions in the coursework of the month, sources in the Rubber Board said.
Record prices
The New Year was marked with rubber prices in the spot market hitting an all-time high of Rs 208 a kg even as futures prices continued to reign at record levels. The year 2010 saw rubber prices rising 48 per cent in futures and spot markets, Geojit Comtrade said.
In the international markets also, rubber scaled record levels in most markets. The main reasons for the spurt in prices was the robust demand, especially from China and India due to an car boom as well as a fall in supply due to adverse climatic conditions, which, in turn, created demand-supply mismatches. This has forced countries such as China to increase imports and their latest warehouse inventories reveal a 1.8 per cent rise in stock to 66,515 tonnes, Geojit Comtrade pointed out.
Growth trigger
Import of natural rubber increased for both sheet and block rubber as domestic prices often times outpaced international prices in the coursework of the first half of the year. However, the cost disparity between domestic and international prices has now been contained and international prices have been ruling well above domestic prices since November. This augurs well for the country's export sector, which had been languishing in the coursework of the first half of the current year.
The consumption of natural rubber in India had registered a fall of 1.3 per cent to 77,500 tonnes (78,500 tonnes) in December. However the aggregate consumption in the coursework of the first nine months of the fiscal rose by 1.6 per cent to 7,06,050 tonnes (6,95,065 tonnes). The trigger for the growth came from the Indian auto tyre sector where demand grew by 3.4 per cent even as the non-tyre sector registered a fall of 1.4 per cent.
Rubber Board officials also pointed to the downward trend in consumption from November and said that production in the coursework of the remaining months could be higher than last year's levels. Stocks available at the end of the year are estimated at 3,07,170 tonnes, which is higher than the 2,69,740 tonnes available at the end of last year. very 65 per cent of the stocks are available in usable form with the tyre companies and ought to be sufficient for their requirements for the approaching couple of months, sources pointed out.
Futures trading could curb rising rubber price : NMCE CEO
MUMBAI (Commodity Online): National Multi-Commodity Exchange of India Managing Director and CEO Anil Mishra said strengthening up commodity futures can be a fine treatment for curbing the rising prices of commodities rubber.
The rising cost of rubber has been a concern for the buyers and industries dependent on rubber.
Stressing the effective use of commodity futures market to control rubber prices, Mishra said commodity futures market had lots of types of stakeholders with different objectives; therefore they take different opposite and diverse decisions and give opportunity to the users to be able to buy at cheaper cost.
Mishra explained that lesser carry-over inventory, not supply, extended rain and vagaries of weather in most producing countries have kept the rubber cost high globally and there is no cost drop in sight. The challenge for rubber user-industry is how to manage the cost of rubber the key raw material.
Mishra further detailed that the regulator, Forward Markets Commission (FMC), had expertise to make use of various risk management tools such as daily cost limit, preliminary margin, additional margin, special margin, and mark-to-market, position limits and penalties and makes use of all these tools effectively as was appropriately necessary. It monitors the trading live on line.
The global shortage of rubber has affected worst in China and India; it is the tyre industry which suffers most. Tyre production in India in the first-half of this financial year (April-September 2010-11) increased 28 per cent while exports registered an increase of 18 per cent.
According to the Automotive Tyre Manufacturers Association (ATMA), production increased in all tyre segments while growth was negative in exports of truck/bus tyres, light commercial vehicle and tractor tyres.
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