Short supply fears in rubber overriding price rise

Short supply fears in rubber overriding price rise
Demand shortage seen at 5 lakh tonnes by 2015.

Chennai, Jan. 19

Rubber product manufacturers are concerned more about availability than price, said Mr Vinod T. Simon, President, All-India Rubber Industries Association.

Addressing the media on the sidelines of the launching ceremony of India Rubber Expo 2011, he said though the rubber price is going up steeply, availability of the raw material is a bigger issue.

Shortage looming

“There was a supply gap of 0.5 tonnes in 2009-10. Though the country produces 8.5 lakh tonnes of rubber annually, the demand was nine lakh tonnes. Triggered by the country's growing auto sector, the demand is expected to go up to 9.5 lakh tonnes in 2010-11, thereby widening the gap to 1 lakh tonnes that needs to be bridged through imports.

“At this rate, India will face a shortage of at least five lakh tonnes of rubber by 2015,” he said.

Duty cut

However, he said the Government's recent announcement on duty cut (to 8 per cent from 20 per cent earlier) came as a breather.

Talking on the expo, which was inaugurated by the Governor of Maharashtra, Mr K. Sankaranarayanan, here on Wednesday, he said this year it is spread over 15,000 sq.mt with over 300 participating companies from India and around the world.

And the organisers expect over 20,000 visitors from over 30 countries.

About 40 eminent rubber technologists, scientists and experts from the rubber industry – Indian and international, will speak at the conference sessions on current global situation of natural and synthetic rubbers, likely trends in the future and action already in place.

A buyer-seller meet has also been organised along with CAPEXIL, which is expected to bring together at least 30 international buyers and sellers, Mr Simon said.



Sheet rubber hits Rs 227/kg on short covering


Kottayam, Jan. 19

Spot rubber prices increased to a new high on Wednesday. The market firmed up further on fresh buying and short covering following the sharp gains in the domestic and international futures. Meanwhile, in the global market the key Tokyo and Shanghai rubber futures hit all-time highs amidst supply concerns and strong demand.

According to reports, TOCOM could hit ¥500 shortly as the start of the wintering season in major producing countries could reduce output.

While the rise in rubber prices cheers the producing sector as a whole, small industries based on the raw material are struggling to survive. At the same time, growers are suffering due to the shortage of skilled tappers since youngsters are not interested to join the profession. The unexpected and intermittent changes in weather have been another challenge faced by them during the season.

Sheet rubber closed firm at Rs 227 (225) a kg, according to dealers. The grade increased to Rs 228 (225) a kg, as quoted by the Rubber Board.

FUTURES IMPROVE

The February series improved to Rs 234.70 (231.61), March to Rs 240.70 (236.76), April to Rs 249.79 (245.08) and May to Rs 255.75 (250.36) a kg for RSS 4 on the National Multi Commodity Exchange.

RSS 3 (spot) slipped to Rs 252.28 (252.78) a kg at Bangkok. The January futures for the grade flared up to ¥465 (Rs 256.77) from ¥452.8 a kg during the day session but then remained inactive in the night session on the Tokyo Commodity Exchange (TOCOM).

Spot rates were (Rs/kg): RSS-4: 227 (225); RSS-5: 220 (218); ungraded: 211 (208); ISNR 20: 223 (220) and latex 60 per cent: 153 (152.50).



Govt notifies 40,000-t rubber import at 7.5% duty; industry not enthused

KOCHI: The government’s notification inviting applications for the import of natural rubber under tariff rate quota has come at a time when international prices are at a record high. Saying that the imports are not practical at a time when prices and availability are not favourable, user industries have called for a complete waiver of customs duty on rubber.
The scheme allows for the import of 40,000 tonne at a reduced duty rate of 7.5% before March 31, 2011. The notification dated January 17, 2011 has invited applications from actual users till March 24.
In a letter to the Union Commerce Ministry, the Automotive Tyre Manufacturers Association’s chairman Neeraj Kanwar said the “tyre industry is faced with the unprecedented and difficult situation of uncertainty in sourcing natural rubber to meet the growing demand for tyres arising from the high growth in the automotive segment”.
ATMA has also requested the government to allow duty-free import of 200,000 tonne in the next one year.
Earlier, taking into account the lack of availability and a sharp increase in the prices of natural rubber in the domestic market, the user industries had approached the government for a reduction in the customs duty to 7.5 % and a permission for duty-free import of 2 lakh tonne on priority. A government-appointed committee that studied the issue recommended a cap on import duty at 20% or `20 per kg, whichever is lower.
It is in this context that the government has allowed an import of 40,000 tonne at 7.5% duty. It has decided to cap the duty at 20% or `20 per kg, whichever is lower, from April, 2011. However, the notification has come at a time when international prices are at `252.78 per kg. The domestic prices are at `225 per kg as on Tuesday.
International prices have been rising on account of the unfavourable weather conditions in major rubber producing countries. The tight supply conditions prevailing in these markets have caused a sharp escalation in prices. Speaking to ET, CPM Spices Corporation Proprietor Biju John said the news that India would be going to import has led to a further rise in international prices.
Cochin Rubber Merchants Association’s President N Radhakrishnan said the domestic prices might shoot up if the industry was not importing. “There is a supply shortfall of 85,000 tonne to 100,000 tonne in the current fiscal,” he pointed out. “The industry can meet this shortfall by importing small lots from different countries,” he added.



SIPH Says Rubber Demand To Stay Strong

French-listed natural rubber group SIPH expects rubber demand to remain strong in 2011 thanks partly to healthy appetite in emerging countries such as China and India, its deputy chief executive told Reuters.
SIPH, in which tyre giant Michelin holds a 20 percent stake, should see rubber production increase gradually from 2013, Olivier de Saint-Seine said in an interview on Monday (January 17).
With crude oil prices heading towards $100 a barrel and other raw materials prices surging to record highs, key Tokyo rubber futures hit a new peak on Monday (January 17). Traders expect further gains on mounting concerns over supply tightness.
"We are not expecting world production to rise very sharply. Demand is strong globally, essentially in emerging countries like China or India but also in Europe and in the U.S.", Saint-Seine said.
The group supplies clients including Japan's Bridgestone and Germany's Continental and has plantations and industrial sites in Nigeria, Ghana, Liberia and Ivory Coast.
SIPH's Ivory Coast business was operating as usual despite a post-election leadership crisis that has claimed the lives of almost 250 people according to the United Nations. "We are very vigilant and we know how to adapt," Saint-Seine said. "As of now, operations in this country are running normally."
SIPH, which stands for Societe Internationale de Plantations d'Heveas, produces and distributes natural rubber obtained from the latex of Hevea trees.
Shares of SIPH rose nearly 81 percent in 2010 on the back of a sharp rise in rubber prices and are up almost 31 percent since Jan. 1, giving it a market value of around 550 million euros ($732 million).
SIPH production amounted to around 130,000 tonnes in 2010 -- compared with the estimated 10 million tonnes produced in the world annually -- and should be stable this year before increasing gradually from 2013 as the group hopes fresh plantations will start producing latex, Saint-Seine said.
The executive said SIPH would reinforce its presence in west Africa but that it would study potential acquisitions anywhere if opportunities arose.
"We do not rule out looking in the direction of Asia," Saint-Seine said.
Thailand and Indonesia are the two main producers of natural rubber.



Natural rubber prices at record high

New Delhi, Jan 18 (PTI) Natural rubber prices continued to remain at record Rs 225 per kg on strong global cues.
Prices of natural rubber, a key component for making tyres today closed at Rs 225 per kg in Kottayam and Kochi, which accounts for 90 per cent of the country''s production.
According to industry sources, the rally in natural rubber prices is due to the surge in prices of the commodity in the international market.
Natural rubber prices in the global market touched a fresh high of Rs 247.3 per kg as strong demand from China and the US is fuelling the prices of the commodity.
"International prices are at record high level and are likely to remain at that level in near future due to strong demand," Indian Rubber Dealers Federation Treasurer Ibrahim Jalal said.
Domestic prices are following the international trend, he added.
A surge in demand from the US on the back of better-than-expected growth in the automotive segment is further pushing the global prices of the commodity and the impact is also felt on the domestic market, said an expert.
However, the present rally in the prices of commodity is due to the global cues as the supply situation in the country has improved, Jalal said.
India''s production of natural rubber in 2010 is estimated at around 8.5 lakh tonnes, whereas the total demand for natural rubber in the country is nearly 10 lakh tonnes per annum.



India tyre body demands lifting of import tax

MUMBAI (Commodity Online) : The tyre industry in India has called for lifting of government duties on Natural Rubber at least for the next one year in the context of surging rubber prices.
Currently, a customs duty of 7.5% is levied on rubber even as rubber prices continue to maintain Rs.220 a kg.
The exhortation comes from the Automotive Tyre Manufacturers Association (Atma) whose Chairman Neeraj Kanwar shot a letter to Commerce Secretary Rahul Khullar asking for duty-free import of 200,000 tons of natural rubber over the next one year. This is currently the demand-supply gap of rubber in India.
Meanwhile, rubber advanced to a record high in Tokyo and Shanghai when purchasers accelerated the procurement of rubber on supply-side concerns.
Currently it is leaf-shedding season for rubber in Thailand and production is expected to come down by 45% to 60% when contrasted with peak seasonal output.
Demand from India and China in the automotive sector also add to price surge. Rubber has advanced 12% this January adding to the rally of 50% past year.
The June-delivery contract surged 2.9 % to touch 466.3 yen a kilogram ($5,668 a metric ton) before finally being traded at 466.1 yen on the Tokyo Commodity Exchange at 1:41 p.m.
Natural-rubber inventories in China decreased by 175 tons to reach 68,675 tons, as per a survey carried out by the Shanghai Futures Exchange on Jan. 14 of 10 warehouses. The inventory figure is 55% lower YOY.