‘Commodity futures can help contain rubber prices'

‘Commodity futures can help contain rubber prices'

Pointing out that commodity futures could be the panacea for managing price risk ailing industries that are dependent on rubber, National Multi-Commodity Exchange of India Managing Director and CEO Anil Mishra on Friday said ever-rising rubber price was a matter of concern.
“Lesser carry-over inventory, not enough supply, extended rain and vagaries of weather in most producing countries have kept the rubber price high globally and there is no price drop in sight. The challenge for rubber user-industry is how to manage the cost of rubber the key raw material,” he said. Pressing for use of commodity futures market to control rubber prices, Mr. Mishra said commodity futures market had many types of stakeholders with different objectives; therefore they take different opposite and diverse decisions and give opportunity to the users to be able to buy at cheaper price.
He further pointed out that the regulator, Forward Markets Commission (FMC), had expertise to use various risk management tools such as daily price limit, initial margin, additional margin, special margin, and mark-to-market, position limits and penalties and uses all these tools effectively as was appropriately required. It monitors the trading live on line.
Stating that there was global tightness in availability and it was more so in India due to good growth in tyre sector demand, Mr. Mishra said tyre production in India in the first-half of this financial year (April-September 2010-11) increased 28 per cent while exports registered an increase of 18 per cent.
Production increased in all tyre segments while growth was negative in exports of truck/bus tyres, light commercial vehicle and tractor tyres, according to the latest data by the Automotive Tyre Manufacturers Association (ATMA).


As rubber keeps inflating, be ready to pay more for tyres

This may be the right time to change the tyres of your car, if you haven’t already.
For tyre makers are preparing to hike prices by 3-5% as a relentless surge in input costs is making it difficult for them to maintain margins.
While JK Tyres has already announced its plan to increase prices by 4-5% this month, Balkrishna Industries, the specialty tyre manufacturer and exporter, said it will hike prices between 6% and 8%.
Ceat said it will raise tabs by 2-3%. “We are gradually increasing prices instead of taking a big price jump. We had hiked prices by 1-2% in December,” a Ceat spokesperson said.
Prices of natural rubber doubled in 2010 and was ruling at Rs206 per kg on December 30. Natural rubber comprises a third of manufacturing cost of tyres.
The prices of steel, another component that goes into the making of tyres, are also expected to rise this month.
Shweta Mungre, analyst with Batlivala & Karani Securities India, said in a note that the Automotive Tyre Manufacturers’ Association and rubber dealers see little possibility of a decline in rubber prices in the near term.
That’s because of the global supply constraints arising from erratic weather conditions in key rubber-producing regions and continuously growing demand from the domestic and Chinese tyre industry.
As a result, domestic natural rubber prices are expected to touch as much as Rs230 in the coming months.
“In past 18 months, the input cost have gone by 35%. However, the manufacturers were able to pass on only18-19% of the cost. Margins have shrunk in the last quarter,” said Ragupati Singhania, vice chairman and managing director of JK Tyres.
“We don’t see a respite as far as input cost is concerned. With heavy rains in rubber growing countries, we see severe situation ahead. We foresee another round of price hike in the month of April next year,” said a spokesperson for Balakrishna Industries.
“We have been getting indications from the tyre companies on the decision of price hike. We expect the tyre prices to go up by 4-5% from January onwards,” said S P Singh, convenor of All India Tyre Dealers’ Federation.
According to Singh, the consumption of tyres have gone down by 10-15% in the North and Eastern regions.
Life of a tyre remains longer during the winter season, due to which the replacement market is moving slower. Tyre makers are feeling a pressure as sales are dropping and prices are increasing.

Rubber mart set to be rangebound

Malaysian rubber is likely to trade rangebound moving into the New Year with external leads taking charge of the market, dealers said.
"It is hard to determine the movement of the market next week but I am sure it will take its leads from the rubber futures' price trend in the Tokyo Commodity Exchange (TOCOM)," a dealer said.
He added that there were some slight correction lately since Tuesday but prices would hover around the current prices moving forward.
"With wet weather conditions disrupting rubber tapping, the current supply constraints may last until next February," he said.
He further said prices would be supported by concerns over tight supplies and also the uptrend seen in crude oil prices.
During the week, rubber prices were on a downtrend since Tuesday due to some technical correction to move in line with regional prices.
On a Friday-to-Friday basis, the Malaysian Rubber Board's official sellers' physical price for tyre-grade SMR 20 ended 5.0 sen lower at 1,497.0 sen per kg while latex-in-bulk shed 4.5 sen to 986.0 sen per kg from 990.5 sen per kg.
However, SMR 20 ended the year with a gain of 35.9 per cent or 538.5 sen from the 958.5 sen registered on Dec 31, 2009, while latex-in-bulk rose 38.1 per cent or 376.5 sen per kg from 609.5 sen per kg recorded previously.
Meanwhile, the unofficial sellers' price for SMR 20 was at 1,501.0 sen per kg and latex-in-bulk stood at 985.5 sen per kg, the unofficial closing price for last week was not available due to early closure for Christmas eve.
The rubber mart was closed on Friday following Prime Minister Datuk Seri Najib Tun Razak's announcement, declaring it as a public holiday after Malaysia's maiden victory in the Asean Football Federation Suzuki Cup championship on Wednesday.


Spot rubber stays static


Kottayam, Jan. 1

Spot rubber finished unchanged on Saturday. The market was comparatively inactive as most of the traders were in a holiday mood during the New Year session. Sheet rubber closed steady at Rs 206.50 a kg both at Kottayam and Kochi according to traders. The transactions were low.

Futures gain

The January series increased further to Rs 211.78 (210.40), February to Rs 216.94 (215.60), March to Rs 221.34 (220.10) and April to Rs 228.44 (226.90) a kg for RSS 4 on the National Multi Commodity Exchange (NMCE).

Spot rates

Spot rates were (Rs/kg): RSS-4: 206.50 (206.50); RSS-5: 199 (199); ungraded: 195 (195); ISNR 20: 204 (204) and latex 60 per cent 138.50 (138.50)