Spot rubber stretches gains as rain affects tapping

Spot rubber stretches gains as rain affects tapping
June 2, 2011


KOTTAYAM, JUNE 2:
Spot rubber prices increased further on Thursday. Heavy rain has already affected production and supplies to a great extent in almost all plantations. Most of the traders were expecting an increase in prices on supply concerns during the ongoing monsoon season.

According to sources, there were enquiries from major manufactures in the past couple of days, possibly reacting to the change in weather though they have not been visibly very active. The market might suffer from acute shortage of the raw material during the ongoing season, they predicted.

Sheet rubber increased to Rs. 226 (223.50) a kg, according to traders. The grade improved to Rs 225 (224) a kg both at Kottayam and Kochi, as quoted by the Rubber Board.

The June series recovered partially to Rs 228.40 (226.60), July to Rs 233.35 (231.44), August to Rs 234.44 (232.16), September to Rs 231.50 (230.02) and October to Rs 230.98 (225.90) a kg for RSS 4 on National Multi Commodity Exchange.

RSS 3 (spot) dropped to Rs. 234.63 (236.36) a kg at Bangkok. The June futures for the grade moved down to ¥ 415.0 (Rs. 230.49) from ¥ 420.05 a kg during the day session on Tokyo Commodity Exchange.

Physical rubber rates (Rs/kg) were: RSS-4: 226 (223.50); RSS-5: 221 (220); ungraded: 217 (216); ISNR 20: 214 (212); and Latex 60%: 132.50 (131)





Rubber output likely to touch record 9 lakh tonnes
June 2, 2011


CHENNAI, JUNE 2:
The country’s natural rubber production this year could be a record nine lakh tonnes with output likely to register a 5.8 per cent growth.

According to the Association of Natural Rubber Producing Countries (ANPRC), the production is estimated to have increased 5.6 per cent in the first quarter of the calendar year and in the second quarter the growth is projected at 7.2 per cent.

During January-April, production increased by 5.7 per cent to 2.67 lakh tonnes (lt) from 2.53 lt in the same period a year ago.

The projection is against 8.51 lt produced last year and 8.20 lt in 2009. Rubber production in 2008 hit a record 8.81 lt before factors such as dry weather and labour woes dragged the output.

If the production hits the projected level, it will be just 75,000 tonnes lower than the world’s third largest producer Malaysia. The traditional plantation country is seen producing 9.75 lt this year with a 3.6 per cent growth. Last year, production growth was 9.6 per cent against India’s 3.8 per cent.

The ANPRC, whose members makes up 92 per cent of the global rubber supply, has made the projection after computing the actual production figures for January and February. Overall, the global production is expected to increase 4.9 per cent to 9.93 million tonnes.

Going by the association, the growth in the first quarter comes after a drop of 2.5 per cent in the fourth quarter last year.

According to it, consumption this year is likely to increase 4.3 per cent to 9.74 lt. Last year, the consumption was 9.44 lt.

OFFTAKE

The offtake is projected to have increased 2.1 per cent in the first quarter.

CHINA CONSUMPTION

Consumption in China is seen rising 8.6 per cent to 3.5 million tonnes with growth in the first quarter pegged at 5.2 per cent.

Imports of rubber this year could be lower at 1.02 lakh tonnes against 1.87 lakh tonnes last year. (According to the Rubber Board, imports during the last fiscal totalled 1.77 lakh tonnes).

On the other hand, China is expected to import 2.8 million tonnes, including compounds that have a high natural rubber content.

EXPORTS

On the other hand, rubber exports may more than double this year to 57,000 tonnes against 21,700 tonnes last year. The ANPRC has estimated a 40 per cent growth in exports during January-May.

According to the Rubber Board, exports increased 47 per cent during January-May to 24,665 tonnes against 16,724 tonnes during the same period a year ago.

Overall, exports from all countries are projected to increased 10.3 per cent this year to 7.7 million tonnes against 7.4 million tonnes a year ago.






Four factors that may weaken natural rubber prospects
June 3, 2011


There seems to be a weird correlation between climate and markets! Following a simmering summer, monsoons are finally here. And after a spell of heated activity, markets are cooling heels. But with global uncertainties looming, many fear a frost bite!

Yes, given the trends and data that we observe and analyse, natural rubber prices are expected to weaken in the coming months with a slew of factors playing out.

Given below are those four factors and how those factors will impact rubber prices in the coming months, especially in India:

Factor 1: Crude oil

With the global economy slowing down and OPEC mulling a production quota hike, crude oil prices would come down in the coming months. This would also bring down the prices of synthetic rubber which is often used as a substitute for natural rubber. Naturally, synthetic rubber would replace natural rubber in a limited way curbing the natural rubber demand.

Ultimate Result: Natural rubber prices would come down

Factor 2: Automobile demand

Of the 18 passenger vehicle manufacturers in India, 12 who account for 90% of sales, reported sales figures jumping by a paltry 8% in May, compared to 14% in April, said a report in bsmotoring.com. Buyers prefer to check spending even as inventories pile up.

Increased borrowing rates and surging fuel prices play the villainous role here. (Even if the fuel prices drop, chances are less that interest rates would drop immediately, as inflation is driven by multiple factors; further, oil marketing companies may possibly insist on maintaining enhanced fuel price levels to offset previous losses and boost margins.)

The companies reportedly sold 190,838 units in May as compared to 176,432 units in the same month of 2010.

Further, The Society of Indian Automobile Manufacturers (SIAM) has trimmed its annual growth forecast for passenger cars from 16-18 per cent to 14-16 per cent, which can again be revised on sluggish demand persisting.

Worse, with flat steel—a key component in automobiles– manufacturers raising the prices on account of high input costs, automobile manufacturers may further raise the prices to avoid a squeeze on margins. This would possibly be a drag on the industry momentum.

Ultimate Result: Natural rubber demand and prices would come down.

Factor 3: India output

The nation projects a 9 lakh ton natural rubber output in 2011, a growth of 5.8% that lags behind Malaysia’s output by just 75000 tons, said a media report.

According to ANRPC data, India’s Q1 production of rubber in 2011 calendar year has grown by 5.6% while in the coming quarter, the rate could likely be to the tune of 7.2%.

In the period between January and April 2011, India’s natural rubber output stood at 2.67 lakh tons, a 5.7% growth rate over 2.53 lakh tons for 2010.

In April, India’s Rubber Board had projected domestic consumption to the tune of 9.77 lakh tons mainly on automobile demand. But with sluggish sales in the offing, it is highly unlikely that there would be such a huge demand. This means rubber inventories in India would climb.

Ultimate result: Natural rubber prices would come down.

Factor 4: Chinese demand

According to a Business Line report, natural rubber cconsumption in China is seen rising 8.6% to touch 3.5 million tons with Q1 growth pegged at 5.2%. The country is expected to import 2.8 million tons, including compounds that have high natural rubber content.

Globally, exports from all countries are projected to increase10.3% in 2011 to 7.7 million tons against 7.4 million tons in 2010.

But Chinese growth story has many parallels with India’s. There too the fiscal tightening is happening. There too inflation is a problem.