Spot rubber prices top Rs 220/kg

Spot rubber prices top Rs 220/kg


Kottayam, Jan. 12

Spot rubber prices scaled unprecedented heights on Wednesday. In spot, RSS 4 moved above its January futures on the National Multi Commodity Exchange (NMCE), creating another record high on fresh buying and short covering. It was hard to find any bearish factors in the market that could dampen the sentiments in short term.

The market moves in tune with the global rates. There is 20-22 per cent increase in overall production, while tyre companies procure rubber not only for immediate requirement but to reserve a comfortable stock in view of the record price rise every day, said Mr Ibrahim Jalal, Treasurer, Indian Rubber Dealers Federation. Large growers also hold the produce for better catches in the days ahead, he said.

Sheet rubber firmed up to Rs 220 (217) a kg, according to dealers. The grade increased to Rs 219.50 (216.50) a kg both at Kottayam and Kochi according to reports from the Rubber Board.

The January series for RSS 4 closed at Rs 218 (218.02), February at Rs 225.90 (226.33), March at Rs 231.60 (231.80) and April at Rs 239 (237.80) a kg on the NMCE.

RSS 3 (spot) slipped to Rs 241.22 (242.87) a kg at Bangkok. The January futures for the grade flared up to ¥441.5 (Rs 239.53) from ¥432 a kg during the day session and then to ¥442 (Rs 239.80) in the night session on the Tokyo Commodity Exchange.

Spot rates were (Rs/kg): RSS-4: 220 (217); RSS-5: 208 (206.50); ungraded: 205 (202); ISNR 20: 215 (213) and latex 60 per cent 150 (149).



Tyre companies a good bet despite record rubber price?

MUMBAI: Analysts are bullish on Indian tyre makers as higher demand from the after-sales market is seen offsetting a margin squeeze due to unprecedented input cost rise and a likely slower demand growth from original equipment makers due to higher interest rates.
They expect the high-margin replacement market to yield higher volumes and sales, though not all of it may translate into earnings.
Natural rubber prices make up about half the cost of a tyre and the industry has been grappling with falling profit margins as rubber prices soar to a record high on a global supply crunch.
Auto sales in India grew a record 31 per cent in 2010, driven by a burgeoning middle class and easy access to financing.
Though the rising fuel and vehicle costs and a likely increase in interest rates may slow the momentum in the auto sector, analysts said tyre makers will continue to benefit from the robust replacement market.
Apollo Tyres, India's second largest tyre maker, has emerged as the top pick for investors while smaller rival JK Tyre is also seen as a steady stock.
"Just observe the rise in rubber prices over the past eight years and how Apollo has still maintained its operating margins at an average 12-12.5 per cent during the period," said Vijay Sarthy, analyst at Spark Capital.
He expects the company to raise tyre prices in short-term to pass on rise in rubber cost.
Out of 16 analysts covering Apollo Tyres, 11 have a 'strong buy' and 'buy' recommendation on the stock, Thomson Reuters data showed. All four analysts covering JK Tyre have a 'strong buy' rating.
"We are positive on the valuation front but in the near term due to the volatility in the commodity prices the stocks will be rangebound," said Vaishali Jajoo, auto analyst at Angel Broking.
Analysts also said Apollo Tyre's global reach will give it an edge over its rivals.
"We like Apollo Tyres in the tyre sector. All other players are domestic players whereas Apollo Tyres is now having significant presence in Europe and also in South Africa," said Deepak Jain, assistant vice president and research analyst at Sharekhan.
Apollo Tyres through its Netherlands-based subsidiary Apollo Vredestein sells tyres in Europe. It has manufacturing units in South Africa as well.
Jain said Apollo's international operations contribute almost 40 per cent of its EBITDA. This is helping the company as cost of raw materials to sales there is less than half of what it is in India.
"Valuations-wise, JK Tyre and Ceat are at a larger discount to Apollo but institutional people prefer Apollo as it is a low-risk stock and on the longer term, gives slightly better returns," Jajoo said.
"While sales and volume growth would happen, it may not translate into much of an earnings growth for tyre companies ," Sharekhan's Jain said.
Galloping rubber costs have tyremakers worried and with little choice but to raise prices. But tyremakers such as Ceat and JK tyre have said that they would not be able to raise prices as much as required to protect their margins.



Rubber Futures Climb to Record as Rally in Stocks, Crude Oil Boost Appeal

Rubber advanced to a record as an equity rally boosted investor confidence in the global economic recovery, spurring purchases of the commodity used in tires ahead of a seasonal drop in output from top exporter Thailand.
June-delivery rubber climbed as much as 2.3 percent to 450.2 yen a kilogram ($5,409 a metric ton) on the Tokyo Commodity Exchange before settling at 449.1 yen. A rally in crude oil also increased the appeal of natural rubber as an alternative to synthetic products made from petroleum.
Japanese stocks advanced, extending a global rally, as a weaker yen boosted the outlook for export earnings. The yen fell against the euro after Japan’s pledge to help ease the debt crisis that forced Ireland and Greece to seek bailouts.
“Despite high prices, buyers both from China and Japan accelerated purchases ahead of the low-production period to ensure adequate supplies,” Sureerat Kunthongjun, an analyst at Agrow Enterprise Ltd., said by phone from Bangkok. Robust car sales are also supportive, she said.
Rubber has increased 8.4 percent this month, extending last year’s 50 percent rally, ahead of the low-production period that starts in Thailand next month and may worsen a shortage amid rising demand led by China and India.
“The market gained as concern about the European debt crisis eased, boosting investor appetite for riskier assets,” Hisaaki Tasaka, analyst at Tokyo-based broker ACE Koeki Co., said today by phone. “Rubber is also supported by strong fundamentals as supply lags behind China-led demand.”
China Cars
China’s passenger-vehicle sales surged 33 percent in 2010, as government stimulus measures and economic growth helped the nation remain the world’s largest auto market for a second year. Annual vehicle sales surged about 10-fold in the past decade on rising affluence and government stimulus programs.
Passenger-car sales in India may increase 18 percent this year, Pawan Goenka, head of theSociety of Indian Automobile Manufacturers, told reporters in Mumbai yesterday. Shipments jumped 31 percent to 1.87 million last year, according to the group, which represents all automakers in the country.
Natural-rubber production in Thailand during the leaf- shedding season, from the end of February until May, shrinks 45 to 60 percent from peak production, the Association of Natural Rubber Producing Countries said in December.
The Thai cash price climbed to a record 163.05 baht ($5.30) per kilogram today, as supplies remain tight amid strong demand, according to the Rubber Research Institute of Thailand.
May-delivery rubber in Shanghai gained as much as 2.4 percent to 38,560 yuan ($5,832) a ton before closing at 38,280 yuan. The price reached a record 38,920 yuan on Nov. 11.
Oil traded near a one-week high in New York after surging 2.1 percent yesterday as a presidential panel investigating the BP Plc spill in the Gulf of Mexico called for “urgent reform” and a pipeline closure in Alaska threatened refiners’ supplies.



Tokyo rubber futures up

Bangkok (january 12, 2011) : tokyo rubber futures edged 1 percent higher on tuesday, tracking firm oil prices, but gains were capped by profit-taking and investors grew cautious about high prices, dealers said. the benchmark rubber contract for june delivery rose 4.8 yen, or 1.1 percent, to settle at 439.9 yen ($5.30) per kg. "players took profits when prices reached 440.0 yen, signalling 440 yen could be the key resistance," one dealer said.
in a reuters poll, tocom rubber futures were forecast to be at 440.0 yen per kg by the end of january and were likely to rise further to 450 yen by the end of february due to strong demand at a time when supply is thin. asian physical rubber prices were higher on tuesday, with benchmark thai rss3 being offered at a record high of $5.35 per kg as rain has disrupted tapping. asian physical supply was expected to remain thin in february and march as thailand and indonesia, the world's top two producers, are in the dry season, when rubber trees produce less latex, traders said.



Rubber Prices Hit Record High

Kowdiar, Trivandrum: Rubber prices hit a record high yesterday at Rs. 218 for RSS 4 grade. RSS 5 stayed not far behind at 206. The prices are expected to rise in the coming weeks, bringing a smile to the farmers.
The prices had fallen sharply during the recession years. At one time it registered Rs. 55 per kilo. The time witnessed frantic selling of rubber plantations in the outer areas of Trivandrum. Syam Sunder G, one of the lucky buyers at that time, says: “At that time no one wanted rubber. And I could procure some more at cheap prices. I knew it would pick up.”
Now the boom in the automobile industry has boosted the rubber prices. The recent incessant rains make harvesting difficult and hence cause a shortage of sheets. Every rainy day means that tapping is not done to reduce chances of bark decay. The rains have been intermittent in recent weeks, at an unusual time of the year.
“Usually if you keep tapping, the amount of sap you get keeps increasing. If you stop for a few days and then tap, you find that the quantity is much lesser. It has to gradually grow back to the maximum. The rains are persistent and hence the yield is low,” says Syam Sunder.
The rain and cloudy skies in the outskirts of the city also affect the drying of rubber in the sun. Rubber if stockpiled without smoking or drying also gets fungal growth.
Chandrasekharan Nair, farmer and blogger (keralafarmer.blogspot.com), says: “International prices are higher than this. Yesterday it was Rs. 242. The farmers have nothing to fear as it will keep increasing for some time now. There are a few lobbies who want to get the price reduced. They are campaigning for increased export of rubber.”
He also accused the media of downplaying the rubber prices. According to him, some daily newspapers were showing prices that were at times more than Rs20 less than the real price. He alleged that this was a planned effort to loot the farmers and help corporates.



Tyre makers expected to hike prices on surging raw material costs

Industry players suggest a phased increase in prices as rubber input costs continue to impact margins
Tyre manufacturers may increase the prices of their products this month as rubber input costs continue to climb in the domestic and international markets. The increase in prices of tyres is likely to be in the range of 3%-5%, according to industry players and analysts.
"Prices of rubber have touched a fresh record level in both the international and domestic markets. Tyre companies are expected to increase prices of tyres this month. It's difficult to predict the quantum of the hike, but it could be between 3% and 5%," said an analyst at a Mumbai-based research firm, who requested anonymity.
"Of course, we are under pressure due to rising prices of rubber in the domestic market. We are monitoring the raw material prices and if rubber prices go up then it will push tyre prices too," RK Agarwal, head of marketing, Modi Tyres, told Moneylife. But Mr Agarwal did not give an estimate of the quantum of increase.
Apollo Tyres, Ceat and Bridgestone already hiked prices of their products by 1%-2% in December.
"We are expecting an average hike of 3% this month," said a Mumbai-based distributor of one of the country's major tyre makers.
On Tuesday, rubber prices touched Rs216 a kg in the Kottayam and Kochi markets. Prices have increased about 25% within the past three months in the domestic and international markets, mainly due to lower output in the main rubber-producing countries.
"Margins of tyre companies are under pressure and to maintain the current margin level tyre manufacturers will have to increase prices by 8%-10%," Surjit Arora, analyst at Prabhudas Lilladher told Moneylife.
However, such a steep increase may not be viable due to high competition not only among Indian players, but also from Chinese manufacturers. Companies may not be able to pass on the full hike and they may take a hit in operating margins in this quarter, according to analysts.
Experts suggest that the price increase will happen in a phased manner as a large one-time hike could cause lower demand. In the April- December 2010 period, tyre manufacturers increased prices by around 12%.
"One round of a price hike of 3%-5% would happen in this month, although this would not be sufficient to maintain margins," Mr Arora said.
Rubber prices have edged up daily over the past month as unseasonal rain in the major rubber-producing countries interrupted tapping and plantation work, resulting in a fall in arrivals. The slow supply in the market has agitated rubber prices globally.



Rubber goes up up up!

Colombo Rubber Auction saw another day of superior prices, as rubber prices hit Rs.609 per kilo in the yesterday's auction. The average price of the Latex Crepe 1X was around Rs.605.
According to commodity brokers, the increase in prices is due to internal demand for rubber in China and India and increased vehicle production led by these two economies. The supply of rubber has seen a decrease due to adverse weather conditions in major rubber producing countries.



Rise In Rubber Prices Boon For Smallholders

LABIS, Jan 11 (Bernama) -- Rubber smallholders in the Tenang state constituency have benefited from a surge in natural rubber prices, an unbeaten run that started last September.
A smallholder, who just wanted to be known as Abu, said he earned up to RM4,000 a month from his 1.6ha smallholding while another, Tan, who has a 0.8ha plot, said his income rose to RM2,500 a month.
"Our income have increased sharply due to the rise in rubber prices. We lead a better life now," Abu, who has four school-going children, told Bernama at a rubber trading outlet here Tuesday.
He said with the extra income, he was able to enrol his children in computer classes and tuitions.
Tan said although his earning had doubled compared to a few years ago, he had to work hard for it.
"My wife and me had to wake up as early as 3am to tap some 300 rubber trees in our smallholding near Labis town.
For rubber mortgagee Leong, 60, he could get about 500kg of latex worth between RM3,000 and RM4,000 from 50ha of rubber smallholdings, which he leased since rubber prices soared to new highs.
"If the latex contained less water or the scrap rubber is thick, the smallholders will sell them to me at higher prices," said Leong, who employed six rubber tappers.
Licensed rubber trader Leong Mun Wai, 35, said he could buy more than one tonne of latex and scrap rubber from smallholders in the Tenang state constituency.



Rubber Gains to Record as China Car Sales Boost Demand Optimism

Jan. 11 (Bloomberg) -- Rubber extended its rally to a record after data showed China’s car sales jumped by a third last year, boosting expectations that demand for the commodity used in tires will keep expanding amid tight supply. The cash price in Thailand climbed to an all-time high.
June-delivery rubber climbed as high as 444.9 yen a kilogram ($5,355 a metric ton) in an after-hours trading on the Tokyo Commodity Exchange. Trade in this session will be settled tomorrow. The most-active contract has increased 7.3 percent this month, extending last year’s 50 percent rally.
China’s passenger-vehicle sales surged 33 percent in 2010, as government stimulus measures and economic growth helped the nation remain the world’s largest auto market for a second year. Annual vehicle sales surged about 10-fold in the past decade on rising affluence and government stimulus programs.
“The market is buoyed by positive news of strong car sales in China, which improved optimism that demand for car tires will continue to grow amid limited supply,” Sureerat Kunthongjun, an analyst at AGROW Enterprise Ltd., said by phone from Bangkok.
Deliveries of passenger cars, including multipurpose and sport-utility vehicles, rose to 13.8 million last year from 10.3 million in 2009, according to data yesterday from the China Association of Automobile Manufacturers. Total vehicle sales, which count trucks and buses, rose 32 percent to 18.06 million.
Total auto sales in China may reach 20 million this year, Booz & Co. and Nomura Holdings Inc. have forecast. In contrast, light-vehicle sales in the U.S. may be as much as 12.8 million units, according to Ashvin Chotai, the London-based managing director of Intelligence Asia Automotive.
“The strong figures from China added to bullish sentiment in the market,” Kazuhiko Saito, an analyst at Tokyo-based broker Fujitomi Co., said today by phone. “Chinese demand will likely expand further as analysts forecast 10 to 15 percent growth in Chinese auto sales this year.”
Tight Supply
Rising demand from China may worsen a supply shortage as rubber output in Thailand, the world’s largest producer and exporter, is set for a seasonal decline, Saito said.
Natural-rubber production in Thailand during the leaf- shedding season, from the end of February until May, shrinks 45 to 60 percent from peak production, the Association of Natural Rubber Producing Countries said in December.
Northern Indonesia will also experience a low-production period during March to May. Supply in Malaysia usually falls to 60 to 70 percent of that in the peak season, the group said.
“Low production from major producers will continue to support prices,” said Chaiwat Muenmee, analyst at Bangkok-based commodity broker DS Futures Co.
Cash Record
The Thai cash price gained to 162.80 baht ($5.30) per kilogram today, fueled by strong demand ahead of the Lunar New Year holidays and the low-production period, according to the Rubber Research Institute of Thailand. The week-long holiday runs from Feb. 2 in China.
Crude rubber stockpiles held at Japanese warehouses fell 1.2 percent to 6,238 tons on Dec. 31, according to data from the Rubber Trade Association of Japan.
China’s natural-rubber inventories were at 68,850 tons, based on a survey of 10 warehouses in Shanghai, Shandong, Yunnan, Hainan and Tianjin, the Shanghai Futures Exchange said Jan. 7. That was 55 percent lower than last year’s high of 151,832 tons.
May-delivery rubber in Shanghai gained 1.1 percent to close at 37,640 yuan ($5,686) a ton. The price reached a record 38,920 yuan on Nov. 11.



Rubber growers, traders tap warehouse route for gains

As futures prices of natural rubber continue to grow, arrivals at warehouses of commodity exchanges have increased, enabling farmers and traders to rake in increased profits. Arrivals on the NMCE authorised warehouses have increased sharply during the past year.
“We are seeing increased arrival of rubber at the exchange warehouse that increased 89 per cent year-on-year. From 3,480 tonnes as on January 1 last year, rubber stocks have surged to 7,787 tonnes this year. There has been increased participation of hedgers and the open market interest has gone up to 10,503 lots, which is 264 per cent of the daily traded volume on the exchange,” said Mr Anil Mishra, Managing Director and CEO of the NMCE.
This is not surprising as the price difference between the current and futures price for rubber continues to widen. While the January price was Rs 217.99 a kg, the April price has already widened to Rs 237.90 currently. Thus, the grower/trader selling in the forward market can realise over Rs 19 a kg, while delivering rubber to the exchange warehouses. The warehouse receipt would also enable the grower to receive funding from banks.
And there are numerous farmers' cooperative societies and the NAFED that have deposited rubber with the exchange warehouses. Already the exchange has a large number of warehouses in the growing regions in Kerala. But as the storage demand continues to grow, the NMCE is trying to increase the warehouse space to accommodate more stocks, Mr Mishra pointed out.
At the last Trade and Settlement Committee meeting of the NMCE held at Kochi, the stakeholders had agreed to the idea of tendering from exchange empanelled reputed sellers godowns that were to be converted as accredited warehouse for delivery in order to reduce the cost. The NMCE is working hard to implement the scheme.
Delivery
Commodity exchanges are not ideal for giving and taking delivery the world over where only one to two per cent of the delivery takes place. However, they become buyers or sellers of last resort at a time of crisis, a press release from the NMCE said. Delivery is a tool which keeps the prices aligned with physical markets and keeps a curb on manipulators.
The NMCE along with the Forward Markets Commission had recently conducted a training programme for the members of the All India Rubber Industries Association at New Delhi and Jalandhar to educate its members on ‘How futures market is going to solve their problems of price risk management through hedging'. Prof. K.K. Abraham, President of Pala Marketing Cooperative Society said: “Online trading in the NMCE has been a great help to rubber marketing cooperatives and rubber dealers since it kept the price buoyant, thereby doing great service to rubber growers.”
Mr Siby Monipally, Member of the Rubber Board said: “By the introduction of futures trading in rubber and other agricultural commodities, an efficient, transparent and parallel system is in place to further the interest of the farmers and cooperatives.”



High rubber prices salve tax headache

HIGH international rubber prices are making a recent tax rise on exports more palatable, according to some of the Kingdom’s leading figures in rubber production.
Increasing rubber prices are generating high profits for the industry, with quality exports fetching near US$5,000 per tonne on international markets, according to Mong Reththy, who is a prominent businessman and co-president of the government-private sector working group on agriculture.
Last month, Prime Minister Hun Sen signed into law an increased tax on rubber.
If the product is worth below $2,000 a tonne, a tax of $50 per tonne will be charged.
While if the product is worth above $4,000, the tax will be $300 per tonne, according to article three of a subdecree which went into effect on January 1.
For exports worth between $2,000 and $4,000 a tonnes, the tax ranges from $50 to $200.
The tax had previously sat at $50 per tonne, regardless as to the value of rubber.
“I think rubber exporters will have no objection to paying taxes in line with special taxes imposed by the government,” said Mong Reththy yesterday
Rubber producers interviews by The Post raised few concerns about the increase in levies.
Men Sopheak, deputy director of Sopheak Nika Investment, said the government’s decision to raise the tax was acceptable, given the commodity’s rise in value on international markets in recent months.
Sopheak Nika exports some 10,000 tonnes of rubber each year.
While Leng Rithy, president of the Vietnam Rubber Enterprise Federation, said the company – which has been granted land concessions totaling 100,000 hectares – was still studying Cambodia’s decision to increase the export duties.
“The company hasn’t yet produced rubber for export, so we need time to study the decision in advance,” he stated.
Cambodia exported some 35,000 tones to 40,000 tonnes of rubber per year over the last five years, according to data obtained from the Cambodian Ministry of Agriculture, Forestry, and Fisheries.