Floods Cut 1 Percent Of Thai 2011 Rubber Output

Floods Cut 1 Percent Of Thai 2011 Rubber Output
TUESDAY, APRIL 19, 2011

Thailand, the world's biggest rubber producer and exporter, should produce 3.46 million tonnes of rubber this year, down one percent from a January forecast due to heavy floods, the chief of an industry body said on Tuesday (Apr 19).
"We still believe we can produce around 3.46 million tonnes this year, or around 1 percent drop from the previous forecast," Luckchai Kittipol, president of the Thai Rubber Association, told Reuters, referring to a previous forecast of 3.49 million tonnes made in January.
Heavy rains and severe floods in late March battered Thailand's southern rubber-producing region, damaging plantations. Destroyed rubber trees are to be replanted soon, but newly planted trees need up to seven years to mature and start producing latex.
Luckchai said supplies from a 2004 planting expansion in Thailand's northeast would offset some lost production. Farmers in several areas who had stopped tapping latex in late February have also resumed tapping as the dry season ends, he added.
But supplies won't rise immediately. Rubber trees need weeks to rejuvenate and farmers need at least two more weeks to dry and smoke rubber so it can be sold as benchmark RSS-3 grade.
"Supply should rise gradually and return to normal by June at best," Luckchai said. Thailand's monthly production capacity is 280,000-300,000 tonnes of rubber sheet.
PRICES SEEN SUPPORTED
Prices of physical Thai RSS-3 grade rubber have dropped 8.6 percent since striking a record above $6 per kg in February, as economic concerns sparked by the Middle East unrest and worries about the impact of the March 11 earthquake in Japan countered tight supply.
News such as Toyota Motor Corp's decision to build cars at half the rate of its original plans in Japan at least until June 3, which would cost the world's top automaker another 120,000 vehicles in lost production, continued to dampen rubber prices.
Top producers Thailand, Indonesia and Malaysia threatened to take action to prop up prices in March, when tyre grades plunged.
But Luckchai expects prices to stay above $5 per kg. "With the prospect of strong demand not only from China and India, but also in Europe and Japan, this year the average price of benchmark Thai RSS-3 should not be below $5.0 per kg," he said.
That is well below a Feb.14 record high of $6.40 per kg but above last year's average price of $3.60 per kg. On Tuesday (Apr 19), Thai RSS-3 grade rubber traded at $5.85 per kg.
Global demand for rubber, both natural and synthetic, is forecast to rise to 26.1 million tonnes in 2011 from 24.4 million tonnes in 2010, the International Rubber Study Group said in March.
Dealers say this was in part due to a recovery in the automotive sector, though that had not factored in the plight of the Japanese automakers. The U.S. auto industry snapped a four-year sales decline in 2010, including three consecutive months of sales above the 12 million-unit annual rate.
(Reuters, April 19, 2011)




NMCE rubber settles down on selling pressure
TUESDAY, APRIL 19, 2011

NMCE rubber futures continued the bearish trend on selling pressure on Monday. TOCOM futures market also traded down on active selling and September futures settled at ¥422.00 per Kg. Fall in oil prices also added to the downside.
Domestic spot market also continued the fall on sluggish demand. Therefore, taking cues from domestic spot and international market futures ended the day on negative note.
The rubbers futures are projected to continue the bearish trend on strong selling interest on Tuesday. TOCOM September futures are also trading down at ¥409.30 per Kg. on active selling.
China may increase its interest rate for 5th time in coming month on rising inflation concern which might pressurize the prices in near term.
Factors to Watch For
Thai market will be closed from April 13 to 15th due to Thai New year. Therefore supply might remain tight in world rubber market
According to Bloomberg sources, China’s natural-rubber imports were 210,000 tons in March, compared with 110,000 tons in February and 190,000 tons in March2010
According to Department of Disaster Prevention & Mitigation, around 19,641 acres of rubber plantations have been damaged in Thailand due to heavy flood
According to the Rubber Research Institute of Thailand, The physical price of Thai rubber dropped to 177.3 baht ($5.89) a kilogram yesterday after the country’s New-Year holidays from 184.8 baht on April 12
As per deputy head of the China Rubber Industry Association, Natural-rubber demand in China, the biggest consumer, will rise 8% this year. Consumption will be 3.24 million metric tons, while tire output will climb 7.9 percent to an all-time high of 453 million units
DERIVATIVE ANALYSIS
Indian Futures (NMCE)
The NMCE May contract, prices and open interest are falling while volumes are rising. Market is running out of traders willing to open or hold a Buy/ Long. Traders are liquidating both loosing long positions & closing winning short positions. A higher probability the market is set to retrace in price lower at some point forward.
Japan Futures (TOCOM)
The TOCOM active September contract, prices and volumes are falling while open interest is rising. It is a good indication that a sharp rally against downtrend will develop creating a sell point for downtrend.
Shanghai Futures (SHFE)
The SHFE active August contract, prices and volumes are falling while open interest is rising. It is a good indication that a sharp rally against downtrend will develop creating a sell point for downtrend.
Courtesy: Karvy Commtrade Ltd.





India rubber output rises 3.7% to 8,61,950 tons
TUESDAY, APRIL 19, 2011

KOTTAYAM, INDIA (Commodity Online): India's natural rubber production has risen 3.7% in 2010-11 to 8,61,950 tons, according to Rubber Board. Revealing the data at the 165th Annual meeting of the Board here, Sheela Thomas, Rubber Board Chairman said that domestic production stood at 8,31,400 tons and anticipated production for 2010-11 was 9,02,000 tonnes. The anticipated consumption in 2010-11 was 9,77,000 tons.
Domestic consumption has increased by 2 per cent in 2010-11. During 2010-11, growth in tyre production in the automotive sector grew by 23 per cent. Export of tyres also increased by 20 per cent. However, truck and bus tyre exports declined by five per cent. During 2010-11 fiscal, exports stood at 28,424 tonnes compared with 25,090 tonnes in the previous fiscal. Imports accounted for 1,77,482 tonnes, 73 per cent of which was through duty free channels.
Rubber Board does not foresee any shortage for the commodity as the opening stock of rubber in 2011-12 was relatively high at 2,77,095 tonnes against 2,11,290 tonnes in 2010-11. Meanwhile, the Automotive Tyre Manufacturers Association (ATMA) has urged the rubber board to take steps to avoid delays in mandatory inspection of imported rubber which is affecting the raw material availability for manufacturers. The onus of ensuring quality of imported rubber should lie with the manufacturers and not the government, ATMA said,.
Key Tokyo rubber futures have fallen 2.3 percent in early trade on Tuesday, tracking losses in Shanghai and Singapore after Standard & Poor's warned it may cut the United States credit rating, sending oil prices plunging and lifting the yen. The key Tokyo Commodity Exchange rubber contract for September delivery was down 9.9 yen at 415.1 yen per kg as of 0021 GMT. The most-active Shanghai rubber contract for September delivery ended 335 yuan lower to finish at 34,960 yuan($5,351.677) per tonnes on Monday, Reuters reported.
At India's National Multi-Commodity Exchange, May rubber futures opened weaker at 23,800 per 100 kg tracking global trends and is currently trading at Rs 23,535 as against previous close of Rs 24,019.




India: Rubber output likely to touch 9.02-lakh t in 2011-12
TUESDAY, APRIL 19, 2011

KOTTAYAM, APRIL 19:
Natural rubber production in the country rose 3.7 per cent during 2010-11 against the previous year.
Domestic production stood at 8,31,400 tonnes in 2009-10 and 8,61,950 tonnes in 2010-11, the Rubber Board Chairperson, Ms Sheela Thomas, said at the 165th meeting of the Board here on Monday.
She said the anticipated production for 2011-12 was 9,02,000 tonnes. Domestic consumption also increased by 2 per cent in 2010-11.
During 2010-11, growth in tyre production in the automotive sector grew by 23 per cent. Export of tyres also increased by 20 per cent. However, truck and bus tyre exports declined by five per cent.
Ms Sheela said the projected rubber consumption in 2011-12 was 9,77,000 tonnes.
During 2010-11 fiscal, exports stood at 28,424 tonnes compared with 25,090 tonnes in the previous fiscal. Imports accounted for 1,77,482 tonnes, 73 per cent of which was through duty free channels.
The chairperson said there would not be any shortage as the opening stock of rubber in 2011-12 was relatively high at 2,77,095 tonnes against 2,11,290 tonnes in 2010-11.
According to the International Rubber Study Group report, global rubber production-consumption balance in 2010 and 2011 showed deficits of 380,000 tonnes and 234,000 tonnes, respectively.




Tokyo Futures Fall, Oil Plunges On S&P U.S. Warning
TUESDAY, APRIL 19, 2011

Key Tokyo rubber futures fell 2.3 percent in early trade on Tuesday (Apr 19), tracking losses in Shanghai and Singapore after Standard & Poor's warned it may cut the United States credit rating, sending oil prices plunging and lifting the yen.
FUNDAMENTALS
The key Tokyo Commodity Exchange rubber contract for September delivery was down 9.9 yen at 415.1 yen per kg as of 0021 GMT.
The most-active Shanghai rubber contract for September delivery ended 335 yuan lower to finish at 34,960 yuan($5,351.677) per tonnes on Monday (Apr 18).
Oil fell sharply on Monday after ratings agency S&P revised lower its U.S. credit outlook to negative and OPEC ministers said high crude prices could place a major strain on consumer countries' economies.
The euro nursed heavy losses early in Asia on Tuesday (Apr 19) while the yen gained across the board as worries about sovereign debt problems in Europe and the United States prompted investors to unwind carry trades.
(Reuters, April 19, 2011)




Tokyo rubber futures at two-week low
TUESDAY, APRIL 19, 2011

Bangkok (april 19, 2011) : tokyo rubber futures fell to a two-week low on monday, hurt by weaker oil prices and a perception prices were overbought, but limited supply in producing countries should offer support, dealers said. the benchmark rubber contract on the tokyo commodity exchange for september delivery fell 10.1 yen to settle at 425.0 yen ($5.112) per kg. it fell as much as 4.2 percent to 416.7 yen per kg, the lowest since march 30.
the most-active shanghai rubber contract for september delivery also ended 335 yuan lower to finish at 34,960 yuan($5,351.677) per tonnes. "there could be a short-term correction as the market was a bit overbought and weaker oil was an additional negative factor. however, prices could still be supported by tight supply in producing countries," one dealer said. rubber prices will average $4.5 per kg this year as producers try to take advantage of relatively high prices, the indonesian rubber association (gapkindo) said on friday, above last year's average.






Rubber To Average $4.5/Kg In 2011, Above Last Year by GAPKINDO
TUESDAY, APRIL 19, 2011

Rubber prices will average $4.5 per kg this year as producers try to take advantage of relatively high prices, the Indonesian Rubber Association (Gapkindo) said on Friday (Apr 15), above last year's average.
Indonesia, the world's second-largest rubber producer, will produce an estimated 2.972 million tonnes of rubber this year, versus 2.736 million tonnes last year, Asril Sutan Amir, chairman at Gapkindo told a news conference.
"High rubber price has encouraged farmers to over tap the rubber trees," Amir said. "It is still relatively high."
Prices of physical Indonesian SIR20 rubber have dropped more than a third since striking a record above $6 per kg in February, as economic concerns sparked by the Middle East unrest and worries about the impact of the March 11 earthquake in Japan countered tight supply.
News such as Toyota Motor Corp's decision to build cars at half the rate of its original plans in Japan at least until June 3, which would cost the world's top automaker another 120,000 vehicles in lost production, continued to dampen rubber prices.
Top producers Thailand, Indonesia and Malaysia threatened to take action to prop up prices in March, when tyre grades plunged.
But this year's average prices for the tyre-grade rubber would still be higher than last year's $3.11 a kg.
"There was a shift of Indonesian rubber export destination from Japan to China in the last three months, but the volume is very small, only around 10,000 tonnes, he said.
Annual shipments of Indonesian rubber to Japan total 400,000 tonnes, Amir said.
Last month, Gapkindo told Reuters that rubber output in Southeast Asia's largest economy, would rise between 6 and 8 percent this year.
Global demand for rubber, both natural and synthetic, is forecast to rise to 26.1 million tonnes in 2011 from 24.4 million tonnes in 2010, the International Rubber Study Group said in March.
Dealers say this was in part due to a recovery in the automotive sector, though that had not factored in the plight of the Japanese automakers. The U.S. auto industry snapped a four-year sales decline in 2010, including three consecutive months of sales above the 12 million-unit annual rate.
Amir said Indonesian rubber consumption this year would be 460,000 tonnes, in line with the 10 percent rise offered in the March interview.
He said several tyre makers were expanding their factories.
Indonesian rubber exports will be 2.45 million tonnes this year, up from 2.352 million tonnes in 2010, Amir added.
(Reuters, April 15, 2011)




Spiralling costs impact margins
TUESDAY, APRIL 19, 2011 ADMIN
SHARE
TWEET
The MRF stock was down about one per cent after the company last week reported a six per cent year-on-year fall in profits for the quarter ended March. Profits were down to Rs 90 crore on the back of doubling of natural rubber prices last year. Sequentially, natural rubber prices, currently at Rs 230-240 a kg, have risen 16 per cent.
Despite the robust demand, companies have not been able to increase their prices to reflect the jump in the raw material costs due to competitive pressures. High raw material prices and inability to completely pass on the rising costs have meant falling margins for MRF.
HIGH RAW MATERIAL COSTS
Raw material costs as a percentage of sales for MRF increased from 67 per cent a year ago to 76 per cent in the March quarter, resulting in a fall in operating profit margins by 260 bps to 9.2 per cent. With raw material costs at over three quarters of sales, the rise in natural rubber prices as also synthetic rubber and of carbon black on the back of rising crude oil prices will continue to keep margins under pressure.


DEMAND STRONG
While cost pressures are a key worry, revenues, supported by a surge in volumes as well as a rise in prices, jumped 34 per cent to Rs 2,383 crore. Auto volumes for 2010-11 in key segments such as commercial and passenger vehicles have jumped 20-30 per cent over the previous year. With auto volumes expected to grow 12-15 per cent on a higher base for 2011-12, demand from auto manufacturers as well as the replacement market is likely to remain strong. This should keep the revenue momentum going. However, any further increase in interest rates and weak industrial activity will be key risks to demand, especially, for the commercial vehicle sector, and would impact tyre sales.
FINANCIALS
While the high raw material costs are likely to be an issue, a jump in revenues has helped the company keep staff costs and other expenditure as a percentage of sales under control, as compared to the year ago quarter. The challenge for MRF will be to maintain operating profit margins in double digits in 2010-11 (financial year ends in September). While it closed 2009-10 with a margin of 11.1 per cent, for the first six months of the current financial year, the company has just about managed to maintain margins at 10 per cent. At the current price of Rs 6,519, the stock trades at 7.2 times its annualised 2010-11 earnings per share.




Delay in inspection of imported rubber hits industry
TUESDAY, APRIL 19, 2011

Thiruvananthapuram: Delay in mandatory inspection of the quality of imported natural rubber (NR) carried out by government is strangulating inventory management, the rubber industry has said.
The inspections also do not reveal enough inferior sheets to merit the delay in process, it has noted While All India Rubber Industries Association (AIRIA) has urged the commerce ministry to get the inspections stopped, the Automative Tyre Manufacturers Association (ATMA) has written to Rubber Board to consider doing away with the inspection raj for quality imports.
According to sources, the Rubber Board is studying this plea, although it may not be considered in the meeting of the Board on April 18. “The delay in inventory movement because of the quality inspection is hurting the tyre industry,” Rajiv Budhiraja, director-general, ATMA, told FE.
“Sometimes, the delay in inspection would be due to unintended factors like government holidays, we feel that the inspection itself is avoidable,” he said To restrict sub-quality rubber imports, in December 2004, Centre had clamped two curbs. One was the port-based curb, by which natural rubber could be imported only through two ports, Kolkatta and Vizag. The second was that the dumping of low-quality sheets from other rubber-producing countries should be avoided by random quality checks by Rubber Board. The first one was dropped through a court order, after it was challenged by consuming industry.
“This curb of inspection would have been valid only the domestic rubber price was low as in 2004. It is not in tune with then R200-plus per kg domestic price for RSS-4 now,” says Budhiraja.
ATMA argues that a tyre firm would be able to afford to buy natural rubber that does not meet quality standards, since the resultant fall in quality in the finished product would affect their market. The onus would be on the industry, rather than the government, to use rubber that meets quality standards.
“The quality inspection serves only to cause delays,” says Vinod Simon, President, AIRIA. “The rejection rate of imported natural rubber by Rubber Board is less than 1%. This shows that the provision can be dispensed with,” he says.
From May 2011, Centre has included several rubber products including automative tyres and tubes, in the list of products that should have mandatory BIS or ISI quality certification.
Thus quality marking of raw material like natural rubber is redundant. “ Natural rubber is not an end product (for direct consumption by the consumer) in the form that it is imported. Instead it is a raw material and it has to go through a long process of manufacturing to make end products like tyres or other rubber products,” says ATMA’s letter to Rubber Board.