Rubber prices seen stabilising into next year

Rubber prices seen stabilising into next year
October 17, 2011





Rubber prices will remain high through the end of the year despite demand erosion from floods coupled with economic slowdown, with excess supply to be absorbed by the rainy season’s arrival in the South in early November.

Pongsak Kerdvongbundit, the president of the Thai Rubber Association, said prices had been volatile this year: They shot up to a record of nearly 200 baht per kilogramme, then nosedived to about 120 baht per kg now.

But Dr Pongsak says the current price is stable, with supply and demand seemingly in balance at this point.

He predicted a price for two months ahead of more than 100 baht, with a possible slight rise due to disappearance of supply from flood-affected plants and the rainy season’s arrival at southern plantations.

As for next year, a new supply of 200,000 tonnes from the Northeast will gradually enter the market.

Last year, Thailand shipped 3.2 million tonnes of rubber, or more than 30% of global output.

To balance supply and demand, Dr Pongsak said, farmers will cut their old rubber trees in a bid to prepare for a new crop, amounting to 400,000 rai or 120,000 tonnes of rubber output.

“Rubber farmers shouldn’t worry about price,” he said, “as the International Rubber Consortium Limited, the organisation that was a venture between Thailand, Indonesia and Malaysia, is set to maintain the rubber export price.

“So far, the target price is at least US$40 per kilogramme.”

Meanwhile, the Agricultural Futures Exchange of Thailand (AFET) plans to increase the number of contracts by asking the world’s leading tyre makers to trade 300,000 tonnes, or 10% of total exports per year, through the AFET, with incentives offered.

Thailand’s farm product futures trade has been thin from the start seven years ago, while Japan’s Tocom and the Shanghai market have secured most rubber futures trading.

Dr Pongsak said the AFET should have an aggressive development plan to increase market liquidity. He recommended a state agency be set up as a market maker to increase buying, with hedge funds to increase liquidity.

“The exchange should invite some big rubber users to join the market, such as Bridgestone and other tyre makers, to help increase trading volume,” he said.

The bourse should have a clear physical delivery process and quality control, instilling confidence if the product is needed for delivery.

Dr Pongsak also suggested the government reduce the fee levied on rubber exporters from 5 baht per kg to 3 baht to draw more traders.

Prasat Kesawapitak, the AFET chairman, said the exchange was considering easing some regulations to accommodate new traders, as well as increasing types of physical rubber in line with other exchanges. The proposal will go to the government soon.

Wanchai Palotaitakerng, the chairman of the Agricultural Futures Trading Commission, will meet soon with Vorapol Sokatiyanurak, the new Securities and Exchange Commission secretary-general, to seek advice on allowing securities companies that are members of the SET to become AFET brokers as well.

Brokerage members of the SET are prohibited from operating on the AFET.

The futures exchange has only five brokers at present, with average trade of 500-700 contracts per day. Rubber is the only item trading in substantial volume.

Under the SET Act, SET members cannot send trade orders to the other exchange, but if the SET is demutualised, a plan currently on hold, the regulations would be amended.





Tokyo futures near one-week low (Oct 18)
October 18, 2011





BANGKOK, Oct 18 (Reuters) – Tokyo rubber futures dropped more than 3.4 percent to a near one-week low on Tuesday, retreating from a previous three-week high due to falling oil prices, while persistent concerns on the Europe debt crisis still weighed on the market, dealers said.

The benchmark rubber contract on the Tokyo Commodity Exchange <0#JRU:> for March delivery fell 8.1 yen to settle at 313.2 yen ($4.08) per kg.

It fell as low as 3.4 percent to finish at 310.5 yen, the lowest since Oct. 12.

The most-active rubber contract on the Shanghai futures exchange for January delivery fell 1,400 yuan to finish at 27,300 yuan ($4,2851) per tonne.

“Rubber sentiment turned weak due to Europe debt fears. However, Chinese data helped ease some concerns and it seemed like recovering oil prices lent some support,” one dealer said.

Brent crude futures were steady above $110 a barrel, recovering from nearly 2 percent losses during overnight trade as Chinese economic data helped offset fears about Euro debt crisis.

China’s annual economic growth eased to 9.1 percent in the third quarter from 9.5 percent in the previous quarter, the National Bureau of Statistics said on Tuesday, as tight domestic monetary policy and easing foreign demand crimped activity.

The rate was slightly below market forecasts for growth of 9.2 percent, but this was offset by better-than-expected industrial production and retail sales numbers for September.

German Finance Minister Wolfgang Schaeuble said European governments would not present a definitive plan for the sovereign debt crisis at the Oct. 23 summit, curbing investor optimism about prospects for tackling the region’s problems.

Dealers said TOCOM prices could rise further on Wednesday after prices found a strong support level of 310 yen, but still gains were likely to be limited by profit-taking.

($1 = 76.720 Japanese Yen)

($1 = 6.371 Chinese Yuan)





Cambodia’s Rubber Exports up 67 Pct in 9 Months
October 17, 2011





Cambodia has seen an increase of 67 percent in the exports of rubber latex in the first nine months of this year, compared with the same period a year ago, according to the statistics from the Commerce Ministry on Monday.

Cambodia has seen an increase of 67 percent in the exports of rubber latex in the first nine months of this year, compared with the same period a year ago, according to the statistics from the Commerce Ministry on Monday.

The data recorded that from January to September this year, the country had exported a total of 35,000 tons of rubber latex, 67 percent rise from 21,000 tons at the same period last year.

The country earned the total revenues of 160 million U.S. dollars during the first nine months of this year, 186 percent rise from 55.9 million U.S. dollars it earned within the same period last year, it added.

A ton of good quality rubber latex is about 4,100 U.S. dollars on Monday, said Heng Sreng, deputy director of Long Sreng International and president of the Boeung Keth Rubber Plantation in Kampong Cham province.

Cambodia’s rubber latex has been exported to Malaysia, Vietnam, China and South Korea, he added.

Currently, the country has grown approximately 210,000 hectares of rubber plantations, most of them are young crops, which have not yet yielded, according to the statistics of the Agriculture Ministry’s Rubber Department.

Rubber plantations are found grown mostly in the provinces of Kampong Cham, Kampong Thom, Mondulkiri, Ratanakiri, Kratie and Preah Vihear.

Vietnam is the leading country investing in rubber plantations in Cambodia with up to 100,000 hectares of concessional land from Cambodian government.




Market on Oct 18: Buyer resistance saps spot rubber
October 18, 2011





KOTTAYAM, OCT. 18:
Spot rubber turned weak on Tuesday. According to sources, prices fell on buyer resistance following a drop in the domestic and international rubber futures.

Arrivals continued to be low though the peak production season is on, indicating that growers are holding on to their stocks. Hence, volumes were low.

Sheet rubber dropped to Rs 214 (215) a kg, according to traders. The grade slipped to Rs 214.50 (215) a kg both at Kottayam and Kochi, as reported by the Rubber Board.

The November series declined to Rs 213.24 (215.10), December to Rs 215.20 (217.25), January to Rs 216.92 (220.38) on the National Multi Commodity Exchange.

RSS 3 (spot) weakened to Rs 207.74 (208.74) a kg at Bangkok. The October futures declined ¥304.8 (Rs 195.99) from ¥312.5 a kg during the day session and then to ¥298 (Rs 191.62) in the night session on the Tokyo Commodity Exchange.

Spot rates were (Rs/kg): RSS-4: 214 (215); RSS-5: 211 (212); ungraded: 204 (206); ISNR 20: 203.50 (205) and latex 60 per cent: 130 (130.50).





Market on Oct 17: Spot rubber rules steady
October 17, 2011





KOTTAYAM, OCT. 17:
Physical rubber prices ruled steady on Monday. The market lost its direction following the weakness in domestic futures during late trades. Though chances for a sharp upside move are limited as the peak production season is on and the stocks in warehouses are on a rise; gains in the international markets might keep the sentiments on the positive side, analysts said.

Investing in commodities still sounds risky as there is a strong possibility that the long-term trend in most commodities is bearish despite some short lived rallies as they remain well below the peaks reached early this year.Sheet rubber finished unchanged at Rs 215 a kg, according to traders. The grade improved to Rs 215 (214.50) a kg both at Kottayam and Kochi, as reported by the Rubber Board.

In futures, the November series weakened to Rs 214.86 (216.08), December to Rs 217.10 (218.36), January to Rs 220.26 (221.40) and February to Rs 223.01 (224.47) a kg for RSS 4 on the National Multi Commodity Exchange.

RSS 3 (spot) inched up to Rs 208.74 (208.69) a kg at Bangkok.

The October futures increased to ¥312.5 (Rs 197.64) from ¥308.3 a kg during the day session but then slipped to ¥311.2 (Rs 196.86) in the night session on the Tokyo Commodity Exchange.

Spot rates were (Rs/kg): RSS-4: 215 (215); RSS-5: 212 (212); ungraded: 206 (206); ISNR 20: 205 (205) and latex 60 per cent: 130.50 (130.50).





Tyre majors scout for rubber estates abroad
October 18, 2011





KOCHI: Persistent high prices of natural rubber in India are forcing tyre majors to scout for plantations abroad. Leading players like Apollo Tyres, MRF and JK are on the lookout for acquiring plantations or purchasing land to grow rubber as a longterm solution to meet the widening gap between production and consumption of rubber in the country. Southeast Asia and Africa are the two regions that are being considered.

Apollo Tyres was the first to announce its plans for overseas acquisition of plantations. Company chairman and managing director Onkar S Kanwar recently said the company acquired 10,000 hectare on lease in Laos for growing rubber, which would meet a quarter of its monthly requirement of 15,000-16,000 tonne.

A company spokesperson said the tyre major is exploring all options in taking over plantations in Southeast Asia. Apollo has four plants in India, two in South Africa and one in Netherlands. MRF recently announced plans to acquire plantations or companies abroad to offset the high import cost. The Rs 10,000-crore company is looking at opportunities in Southeast Asia, Europe and China. “We are still in dialogue and haven’t finalized any deal. We cannot say when we will strike the deal,” marketing director Koshy Varghese told ET.

JK Tyres, too, is hunting for plantations in Southeast Asia as it fears consumption will continue to override production. “We are examining the options of buying land and growing rubber or whole plantations. But since rubber prices are ruling high, there are hardly any sellers for plantations. We will go by parameters like economic size and quality,” said Swaranjit Singh, the company’s materials director.

RPG Group, which owns Ceat Tyres, is scouting for acquisition through its plantation company Harrisons Malayalam (HML). “Governments are willing to give land on long-term lease and it will take seven years to see the result. We are hopeful of finalizing a deal in three months. Our aim is to replicate HML activity abroad,” said HML managing director Pankaj Kapoor.

Soaring rubber prices have upset the calculations of tyre majors as natural rubber is the important component in tyre production. Given the pace at which prices are shooting up, they don’t want to depend on domestic production alone to feed their expansion plans. Imports do not seem to be an attractive option this year with international prices ruling high and the value of the rupee going down.

In 2010-11, the average price of RSS-4 variety used by tyre manufacturers stood at Rs 190 per kg. In the current year, it has been hovering well above Rs 200 per kg for most of the time after touching Rs 240 early during the year. Consequently, the bottomlines of tyre companies took a hit in the first quarter of the current year.