Rubber ruckus

Rubber ruckus
July 24, 2011





The surest way to balance rubber demand and supply is to allow free imports and exports, with the only regulating mechanism being the tariff rate.

Trade and tariff policies relating to rubber have always tested and stretched the resilience of market participants. The commodity courts controversy simply because of the expectations, often unrealistic, of those at the extremes of the commodity spectrum — primary producers and industrial consumers. And, more often than not, the official response to developing market conditions has been of little help in bridging the expectations gap. While growers, as is their wont, want to obtain the most remunerative prices, consumers want to source the produce at the lowest possible cost; and there lies the rub. There is no genuine price discovery either. Derivative or futures trading has been of little help because of the role of speculative capital, with prices on the bourses having hardly any bearing on demand-supply fundamentals.

So, the growers’ recent consternation over the Government’s decision to permit import of 40,000 tonnes of rubber at 7.5 per cent Customs duty is nothing new. There is no challenge to the Rubber Board’s forecast of a supply shortfall of 75,000 tonnes for 2011-12. The stocks, of about 2.5 lakh tonnes, are equal to three months consumption. Any reduction in inventory without adequate and timely replenishment is a sure recipe for a major price spurt, not only in the domestic market but also globally. This is best avoided because the country would then be at the mercy of supplier countries which will, no doubt, push prices up.

In a rapidly growing economy, rubber consumption is sure to log robust expansion. Unless rubber output growth equals demand growth, supply shortfall and, in turn, imports are inevitable. So, growers, in their long-term interest, must work towards consistently expanding production to levels that make imports unnecessary. There are many, including State-level politicians, who shed tears for small growers and want to be seen protecting their interests. The moot question is whether the former have done anything at all to build capacity among the small growers to face competition from imports. If anything, and regrettably, small growers have remained small. It is essential that measures to make rubber production globally competitive are initiated and implemented effectively. Small growers ought to be an integral part of this strategy. To ensure a stable long-term trade policy, there should be no restriction on the volume of rubber imports and exports. The surest way to balance the market is to allow free imports and exports to coexist. The only instrument the government ought to use to regulate foreign trade in rubber is the tariff mechanism — raise the rate of Customs duty to restrict imports or lower it to encourage larger inflows.






Spot rubber rules steady
July 24, 2011





KOTTAYAM, JULY 23:
Spot rubber closed unchanged on Saturday. Overall volumes were low.

In futures, the August series closed at Rs 210.51 (210.75), September at Rs 210.85 (210.43), October at Rs 210.60 (210.24) and January at Rs 212.45 (212.50) a kg for RSS 4 on the National Multi Commodity Exchange.

Spot rates were (Rs/kg): RSS-4: 210 (210); RSS-5: 208 (208); ungraded: 205 (205); ISNR 20: 208 (208) and latex 60 per cent: 138 (138).





Overseas demand for rubber to slow
July 24, 2011



Malaysian rubber is expected to trade lower next week as the stronger ringgit weighs on prices.

“Overseas demand is expected to slow down due to the strengthening ringgit but tighter supply due to heavy rain in Thailand, a major producing country, may cushion the effect,” a dealer said.

The local market was also likely to be influenced by the commodity’s performance on regional markets as well as industrial data from major rubber consumer countries such as China, he added.

On a week-to-week basis, the Malaysian Rubber Board’s official physical noon price for tyre-grade SMR 20 declined 18.5 sen to 1,372.5 sen per kg from 1,354.0 sen, while latex-in-bulk rose 14.0 sen to 896.5 sen per kg from 882.5 sen.

The unofficial closing price for tyre-grade SMR 20 gained 8.5 sen to 1,368.5 sen per kg from 1,360.0 sen, while latex-in-bulk added 5.0 sen to 892.5 sen per kg from 887.5 sen. —