Kottayam, Jan. 11
Physical rubber prices continued to explore new highs on Tuesday. Another all time high in Bangkok spot and corresponding gains in the domestic and international futures catalyzed the sentiments while the market made all-round gains on fresh buying and short covering.
The market may reach unpredictable levels if its fundamental and technical positions remain uninterrupted, an observer said. Though an improvement in production was reported from plantations, arrivals were low, he added.
Sheet rubber improved to Rs 217 (215) a kg as quoted by dealers. The grade closed firm at Rs 216.50 (214.50) a kg both at Kottayam and Kochi, according to Rubber Board.
Futures gain
The January series increased further to Rs 217.99 (214.87), February to Rs 226.48 (222.95), March to Rs 231.75 (227.91) and April to Rs 237.90 (234.05) a kg for RSS 4 on the National Multi Commodity Exchange.
RSS 3 (spot) flared up to Rs 242.87 (239.68) a kg at Bangkok. The January futures for the grade improved to ¥432.5 (Rs 235.20) from ¥429 a kg during the day session but then remained inactive in the night session on the Tokyo Commodity Exchange.
Spot rates were (Rs/kg): RSS-4: 217 (215); RSS-5: 206.50 (204.50); ungraded: 202 (200); ISNR 20: 213 (212) and latex 60 per cent: 149 (148).
Rubber growers, traders tap warehouse route for gains
Take advantage of the price difference in spot, forward markets.
Kochi, Jan. 11
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.”
Sensitive items import jumps 14% to 40.5k cr
NEW DELHI: India’s import of sensitive products increased 14% to Rs 40,499 crore in the April-October 2010 period with sharp increases in food grains, dairy products, automobiles , edible oil, rubber and alcoholic beverages. Rise in import of crude edible oil increased total edible oil imports to Rs15,882 crore that was 12% higher than imports in the same period last year.
Dairy product imports trebled to Rs536 crore in the seven months period, while rubber imports increased 93.1% to Rs 977.24 crore. Automobile imports more than doubled to . 1,249 crore compared to Rs583 crore in the same period of the previous year. The country also imported more of alcoholic beverages which was 55% higher at Rs102 crore. Imports of cotton and silk, tea and coffee imports dipped by 26.7 per cent and 19.5 per cent during the period to Rs945.44 crore and Rs149.19 crore, respectively. The sensitive items are a list of more than 300 products crucial for the economy monitored by the commerce department on a regular basis.
Import of sensitive items amounted to 4.6% of the country's total imports during the period . Imports of sensitive items from Indonesia, China , Malaysia and the United States have gone up while those from Myanmar , Canada, Brazil and Japan have gone down.
Exporters Worried Over Rupee Volatility
In another development, exporters have sought government intervention to help them deal with the exchange rate volatility that has made business decisions difficult for them.
“These days the currency is behaving in a more volatile manner than the stock exchange ,” Fieo president Ramu Deora said, adding that it was not helping anybody other than speculators.
“These days the currency is behaving in a more volatile manner than the stock exchange ,” Fieo president Ramu Deora said, adding that it was not helping anybody other than speculators.
They have sought a minimum exchange rate guaranteed by the Centre, interest payment on foreign currency accounts and greater convertibility of the Indian rupee to mitigate the hardship.
Indian rupee moved in a 8% band against the dollar in 2010, ranging between Rs43.74 and Rs48.76.
Such major fluctuations send all our price and profit calculations haywire and in some cases we have to suffer losses, said S P Agarwal, president, Delhi Exporters Association. “For instance if orders for my goods are booked when a dollar is ruling at Rs47 and by the time I realise my payments it falls to Rs45, I may end up suffering a heavy loss as we work on very thin margins,” Agarwal said. India’s exports are expected to overshoot the target of $200 billion set for the year thanks to a recovery in demand in the US and parts of Europe and diversification into new markets.
Climbing natural rubber price increases global butadiene demand
Climbing natural rubber prices, and the resulting increase in synthetic rubber, is putting a squeeze on the global butadiene market, sources said during the past week.
The issue begins in Asia, a US source said last week, but spreads into Europe -- where SBR producers are clamoring for butadiene -- and then trickles down to the US market, where buyers are not seeing enough imports from Europe.
"Basically, you have demand for SBR in Asia," the source said. "But it's cheaper to make the SBR in Europe and then ship it. Much cheaper than just shipping the butadiene. So the US is sitting around, waiting for any excess there might be in Europe. And that material might make its way to the US."
In Malaysia, the rubber market has been climbing to its highest level since 1972. Natural SMR20 (Standard Malaysian Rubber), prices were at $5.17/kg on Friday against $4.97/kg on Jan 4, due to the rainy season affecting production.
Also, new downstream capacities in China and South Korea coming online either late March or early April are expected to tax butadiene supply, which will also coincide with April cracker turnarounds.
That increased demand for synthetic rubber has sent prices for butadiene higher in Europe, where it is being converted into SBR.
A European rubber manufacturer said the high natural rubber price could send more buyers into the synthetic market, which would increase demand and price for SBR. The increase could be limited, though.
"I would think the increase in consumption if buyers switched would be 5-10% maximum," the source said. "It involves formula changes for consumers and its not that easy to switch. There are also two new ESBR sites expected to come on line in China in Q1 2011. This could balance out any increase in demand."
Another rubber manufacturer in Europe said the increased natural rubber price might have only a small impact. Unless, of course, you are a large consumer of natural rubber.
"Natural rubber prices are a concern, but it's difficult to see how a shift to synthetic rubber will change prices that much," the source said. "There are limited studies available to show how much demand you can actually replace. But natural rubber is above $4,000, with banks forecasting $4,500/mt. We will have a situation where those who are large consumers of natural rubber will have high costs and limited availability."
Globally, butadiene prices bottomed out in October and have been trending higher since.
In the US, the spot butadiene price was near $1,610/mt FOB USG during the last week of October. Since then, the price has climbed above $2,115/mt as supplies tightened, a more than 30% increase.
European butadiene has climbed from just below $1,600/mt during the middle of October, to above $1,880/mt FOB Rdam last week.
Sources in the US have said the US price should reach a $275 to $325 premium over the European price to account for freight charges to import the material.
In Asia, the butadiene price has climbed from near $1,760/mt in October to near $2,030/mt FOB Korea.
Tyre firms sceptical of Rubber Board's high stock estimate
Natural rubber consuming industries, faced with record high prices, are turning increasingly sceptical about the Rubber Board’s high inventory projection of 307,710 tonnes as on December 31.
The projection is not “very convincing”, said Rajiv Budhraja, director general, Automotive Tyre Manufacturers Association.
The record high spot prices belie the board’s estimate of huge stocks in the pipeline, he said.
At Rs 214.50 a kg, rubber prices have shot up by 86per cent from a year ago.
Natural rubber traders based in Kerala also concur with the views of the tyre industry.
The board’s output and inventory projections appear to be highly exaggerated, said N Radhakrishnan, advisor, Cochin Rubber Merchants’ Association.
The readily available stocks in the hands of growers and traders will not be more than 50,000 tonnes, he said.
According to Radhakrishnan, rubber output in the country has not shown any appreciable increase during the past few years.
By giving an optimistic picture at the beginning of the year, the board is actually concealing the stagnation in output, he added. In the past two years, the board was compelled to make a downward revision in its output and demand projections.
In 2009-10, it initially projected the output at 867,000 tonnes, but then scaled it down to 840,000 tonnes and later to 831,400 tonnes.
Demand was initially projected at 881,000 tonnes but revised upward to 930,565 tonnes.
The import projection was completely off the mark, as imports more than doubled to 170,769 tonnes from the projection of 80,000 tonnes.
The demand-supply projection for 2010-11 (April-March) was first made in February and revised eight months later in December.
The board initially projected output at 893,000 tonnes, but later scaled it down to 851,000 tonnes. Demand projection was cut down to 948,000 from 978,000 tonnes. In the case of imports, the board again was widely off the mark as in April-December itself imports touched 156,608 tonnes, double the projection of 70,000 tonnes made earlier.
Rubber consumers are equally worried about timely availability of the raw material, Budhraja said.
The board should streamline and fine-tune its data collection and dissemination methods, he said.
“We should have quarterly projections and an update on the output and demand for the previous quarters,” he said. The board currently gives updates only once a year, he added.
Rubber input makers seek protection
While natural and synthetic rubber prices are on a roll, chemical intermediaries used in the processing of rubber are facing rough weather.
So much so, the Directorate General of Safeguards has initiated investigation into imports of rubber chemical PX-13. The probe is being done after a year’s gap. Officials say safeguard investigations are sensitive, since they are imposed on bonafide imports (bought under proper channels) and not dumped ones. The investigations can only be done if there is material evidence suggesting serious injury to the Indian manufacturer.
Nocil, the largest manufacturer of rubber chemicals, with 70 per cent of market share, has asked for imposition of safeguard duty for three years on the rubber chemical, extensively used in treating natural rubber, synthetic rubber and other synthetic rubber-based compounds.
Industry sources said the high margin earned by rubber manufacturers has been partly due to the low cost of raw materials, most of which is imported. Many countries, including the US, China and Saudi Arabia have excess supply and lean domestic market conditions, forcing companies in these countries to sell at a cheaper rate. Therefore, even if rubber spot prices have shot up in the domestic market, chemical intermediaries are not benefiting.
Besides, the directorate general of foreign trade (DGFT) has begun investigations on pleas for anti-dumping duties on two basic organic chemicals widely used for rubber processing, among its other uses (in making drugs, pharmaceuticals, dyes and dyestuffs, too), acetone and aniline. Gujarat Narmada Fertiliser Corporation has sought a review for the former, to continuw the anti-dumping duty imposed in 2006 for another five years. For acetone, the DGFT is probing on a representation from Hindusthan Organic.
Dumping is defined as an unfair trade practice, with goods exported to another country at a price lower than its normal value. Thus, anti-dumping, as approved by the World Trade Organisation, is a measure to restore fair trade by imposing an additional duty on the imported good to remove the price anomaly between these and domestic products.
In 2010, new duties were imposed on 26 items, mostly on industrial chemicals. On most, the duty was imposed for five years.
Exports & Imports Rubber imports double to Rs 2,000 cr in April-Oct
New Delhi, Jan. 10
Rubber imports have nearly doubled to over Rs 2,000 crore in April-October 2010 and, along with a surge in other sensitive items such as automobiles, edible oils and milk, led to a 14.1 per cent rise in import of such products during the same period to Rs 40,499 crore.
With domestic supplies not meeting demands, rubber imports have risen 93.1 per cent to Rs 2,026.84 crore from Rs 1,049.6 crore during April-October 2009, according to data released by the Commerce and Industry Ministry on Monday.
Currently, domestic rubber prices are about Rs 210-215 a kg, whereas international prices are about Rs 240 a kg. Last month, to increase domestic availability of the item and check rising prices, the Government had cut import duty on natural rubber to 7.5 per cent from 20 per cent for shipments up to 40,000 tonnes till March 31, 2011. After that date, the duty will be reinstated at whichever is the lower of 20 per cent or Rs 20 a kg.
Autos, auto parts
Automobile imports also saw a 114.3 per cent jump to Rs 1,249.92 crore during the period, while that of parts and accessories of motor vehicles rose 30.1 per cent to Rs 8,607 crore.
Imports of edible oil increased 11.8 per cent to Rs 15,882 crore. Within this segment, crude oil imports went up 17.2 per cent, while that of refined oil fell 16 per cent. Increase in edible oil import is mainly due to substantial increase in import of soyabean crude oil, the official statement said.
Imports of milk and milk products saw four-fold jump to Rs 536.12 crore. Foodgrains surged to Rs 211.25 crore from Rs 12.47 crore.
Alcoholic beverages increased 55.4 per cent to Rs 287.4 crore.
Total imports
While total import of 415 sensitive products increased to Rs 40,499 crore (April-October 2010) from Rs 35,487 crore during the previous year, the gross import of all commodities was Rs 8,89,827 crore against Rs 7,43,469 crore.
Imports of pulses, fruits and vegetables (including nuts), cotton and silk, spices and tea and coffee declined during the period; that of all other items, including products of SSI, marble and granite, increased.
Imports of sensitive items from Indonesia, China, Argentina, Korea, Malaysia, the US, Germany, Ukraine, Thailand, Australia, Cote D' Ivoire, the UK, Czech Republic, Vietnam and New Zealand have gone up while those from Myanmar, Canada, Brazil and Japan have gone down.
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