Local rubber market plunges, falls below global rates

Last Updated: Wed, Dec 05, 2012 03:53 hrs

The natural rubber market on Tuesday plunged to a recent low as the benchmark grade RSS-4 quoted at Rs 163 per kg, less than the Rs 165 quoted in international markets. This is the first time in eight months that the local market quotes have fallen below those of the international markets. For the past eight months, local prices were higher by Rs 10-12 per kg compared to global prices, which caused a sharp increase in the import of natural rubber.

A month ago, the local market quote was Rs 176 per kg. The stock in the local market is one of the highest in recent times as imports have been at the highest level during the past six months. This was due to the lower prices in the global markets. During the April-October period 130,966 tonnes were brought into the country, mainly by tyre makers. This is compared to 99,760 tonnes imports during the same period of the last financial year.

Imports are expected to go up in the coming months as prices of SMR-20 grade rubber, which is almost equivalent to the local RSS-4 grade, are ruling lower in Bangkok and Kuala Lumpur markets. On Tuesday, Kuala Lumpur market quoted Rs 154 for a kg of SMR-20, while the price of RSS-4 in India was Rs 163. As a result, experts say, imports in the current financial year would be the highest and might cross 200,000 tonnes by March-end 2013.

The global markets are now on a crash mode as demand is sluggish across the world due to economic recession. Imports by China, the world’s largest consumer of natural rubber, are likely to be lower by 15-20 per cent this year. Owing to this single factor, the global markets will have excess supply and will be in a bearish mode for the rest of the current financial year.

There will not be any shortage of rubber as most of the countries producing rubber have decent stocks. According to Rubber Board data, as of October India had a stock of 245,000 tonnes.

Rubber supplies are on the rise now as the main tapping season has already commenced. The monthly output for the November 2012-January 2013 period is likely to be 100,000 tonnes on average. Across all the producing countries, production is on the highest during the winter season. As a result, the rubber market would be in a bearish mode for the next three months, says N Radhakrishnan, leading rubber trader and former president of Cochin Rubber Merchants Association. Prices are likely to drop further as supply rises during the winter season, he added.

A change in the market can be expected only by the next summer season, when tapping would slow down thanks to the scorching summer heat.

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