Spot rubber scales new high

Spot rubber scales new high


Kottayam, Jan. 20

Spot rubber hit another all-time high on Thursday. The market improved on fresh buying and short covering catalyzed by the sharp gain in Bangkok spot price. According to analysts, the prices were set to explore further highs as supply concerns continued to lead the market to unforeseen levels in anticipation of more purchases from tyre makers.

The small scale industries using rubber as raw material are put to severe hardships and 30 per cent of them have all ready downed shutters, said the Kerala Small Scale Industries Association.

If effective steps are not taken to overcome the present crisis, the entire small units in Kerala will have to be closed down, according to Dr. T.C. Joseph, District President.

Sheet rubber increased to Rs 229.50 (227.00) a kg according to traders. The grade firmed up to Rs 230 (228) a kg, according to the Rubber Board.

FUTURES IMPROVE

RSS 4 improved further with February contracts rising to Rs 238.90 (234.40), March to Rs 245.15 (240.26), April to Rs 253.99 (249.30) and May to Rs 260 (255.68) a kg for on the National Multi Commodity Exchange.

RSS 3 (spot) flared up to Rs 257.73 (252.28) a kg at Bangkok. Its January futures slipped to ¥464.1 (Rs 257.04) from ¥465 a kg during the day session but then bounced back to ¥466.5 (Rs 258.38) in the night session on the Tokyo Commodity Exchange.

Spot rates were (Rs/kg): RSS-4: 229.50 (227); RSS-5: 223 (220); ungraded: 215 (211); ISNR 20: 224 (223) and latex 60 per cent: 155 (153).



Natural rubber prices will remain firm till April
Production likely to rise less than 5% this year.

The bullish trend in natural rubber prices could continue at least till April due to the tight supply situation, according to an official of the Association of Natural Rubber Producing Countries.

“Until April, a further tightness in supply is seen due to the seasonal wintering of trees. From May until the year-end, supply will be better,” said Mr Jom Jacob, senior economist of the inter-governmental association comprising the 11 countries that produce rubber. During wintering, production of natural rubber drops.

In his presentation on ‘Rubber Outlook' at the India Rubber Expo 2011, Mr Jacob said rubber supply is expected to increase lower than five per cent this. “Even this is on the assumption that the weather will be normal and uprooting of aged trees will be low,” he said.

Production by the association members is expected to increase to a maximum of 9.87 million tonnes (mt), up 4.8 per cent from last year. This is in the event that the annual uprooting of rubber trees is at two per cent of the total area under cultivation.

Rubber trees begin yielding from the sixth year onwards; the yield peaks between 10 and 19 years before dropping again. Growers usually tend to replace trees that are older than 30 years.

Giving reasons for the lower increase in production this year, Mr Jacob said due to low planting in 2004, only 0.233 million hectare that is equivalent to 3.3 per cent of the yielding area last year, will be available for tapping this year.

“Moreover, high prices have prompted farmers to retain aged trees, postponing replantation in the last two years. Over-ageing trees and a further decline in yield may sometimes prompt farmers to uproot the trees in 2011,” he said.

In November last year, trees on 16,000 hectares were lost due to heavy winds and floods in Thailand. However, the yielding area expanded as growers tapped dormant trees last year. But the possibility of bringing more areas with dormant trees into production is limited.

Rising labour costs and the possibility of a correction in prices could prompt farmers to keep the trees idle, Mr Jacob said.

The improvement in average yield would be marginal as farmers have already exploited their available short-term means on the heels of high prices. The existing yielding area is dominated by trees planted in the 1980s and the productivity of these trees would have dropped drastically on account of ageing.

“There could be possible damage to yield potential due to unscientific over-exploitation of trees prompted by high prices,” he said, adding that abnormally high prices have made retaining low-yielding aged trees economically viable. For example, if the price of rubber was $2 in 2007 and the yield of a 30-year-od tree was 1,100 kg a hectare, a grower would have got $2,200. This year, even if the yield were to drop to 500 tonnes at around $5 a kg, the grower would only get a return of $2,500.

Besides, the influence of non-traditional regions where productivity potential is lower is increasing. This is because farmers in those regions are new to rubber cultivation.

“Economic recovery and the resultant non-farm employment opportunities can aggravate an already severe shortage of skilled tappers,” Mr Jacob said.

Scope for a rise in supply from next year onwards is better with new plantings being ready for tapping.



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).



Short supply fears in rubber overriding price rise

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



Rubber user industry in a dilemma over imports

Chennai, Jan. 19
The natural rubber user industry finds itself in a dilemma to import 40,000 tonnes of the commodity before March 31 at a concessional Customs duty of 7.5 per cent.
“Prices in the global market are higher than the domestic price by at least Rs 25 a kg. This is a tricky issue as far as imports are concerned,” said Mr Rajiv Budhraja, Director-General of the Automotive Tyre Manufacturers' Association, on the sidelines of the India Rubber Expo 2011.
Last month, the Centre gave its nod for the import of 40,000 tonnes of rubber under the tariff rate quota at concessional duty as part of its plan to keep a lid on rising domestic prices. The normal duty for rubber imports is 20 per cent.
On Monday, the Directorate-General of Foreign Trade issued guidelines for import and it will mainly depend on the consumption during 2008-09 by each unit. The usage has to be certified by the Rubber Board. The registration for imports began on Tuesday and will end on January 24.
Spiking prices
On Wednesday, prices for ribbed smoked sheet (RSS) 4 grade rubber hit a record Rs 227 a kg. In contrast, the comparable RSS 3 grade in the global market ended at Rs 252.08 a kg.
“Price apart, the problem will be finding rubber in February. From February to April, it is wintering season,” said Mr Budhraja.
Wintering season
Wintering season is generally a period of low production.
Rubber prices globally heat up on rising demand and lower supply. Rubber production was up a meagre five per cent at 10.7 million tonnes in 2010.
In India, projections for production during the current fiscal have been pruned to 8.51 lakh tonnes from initial estimates of 8.93 lakh tonnes as output was affected during September-October, said Mr Toms Joseph, Deputy Director (Economic Research) of the Rubber Board, during a session on Rubber Outlook at the expo.
Crude oil prices
The rise in crude oil prices is also influencing the rise in natural rubber prices. This is because synthetic rubber, the substitute for natural rubber, is derived from petroleum products.