Rubber on a high, outlook bullish

By Sangeetha G. Mar 14 2010

Natural rubber prices have been breaking all-time high levels on a daily basis for the past one week as consumption rose mainly due to record monthly auto sales in February. Although prices are expected to ease slightly in April, rubber prices seem to be bullish in the long term.RSS-4 prices in the Indian spot market surpassed the August 28, 2008 high of Rs 142 per kg on March 6. Since then, prices have been moving up to Rs 147.25 as on March 12. 

In the futures market, the April contract prices saw a high of Rs 151.78 in the first week of March.“If the prices break the Rs 153 mark, they are expected to go up to Rs 170 or Rs 175 in the coming months,” said Anand James, chief analyst with Geojit Comtrade.

The price movement has been mainly triggered by the increased demand from the auto sector against lower production. While the production during April –February period has been lower by 4.5 per cent, the consumption of natural rubber has increased by 7 per cent. 

The April- February 2010 period saw the country consuming 853,065 tonnes of natural rubber, against 797,520 tonnes during the same period last year.

In February itself, consumption rose by 8.3 per cent to 77,500 tonnes compared with same month last year. The month saw automobile sales rising by 34.98 per cent at 1,129,783 units compared with February last year. Anticipation of price rise in vehicles due to budgetary duty hikes and stricter emission norms had led to this unprecedented demand. January too had seen sales of 1,114,157 units and the trend is expected to continue in March too. 

Factors such as 2 per cent increase in excise duty, possible hike in money lending rates and increase in petrol and diesel prices are expected to bring down auto sales after April. “This could put downward pressure on rubber prices after April, but the slash in income tax slabs are positive aspects encouraging increased spending by the middle-income groups,” said James.According to Binoy Kurien, director, marketing of Rubber Board, said until the tapping season resumes by June, production will remain less. “Supply will remain tight due to the hot weather in Kerala and re-plantation in several large rubber estates,” he said. However, Association of Natural Rubber Producing Countries in its latest report, predicts better global production in calendar year 2010, compared with 2009. 

As per the report, in 2009, major rubber producing countries supplied 8,898,000 tonnes of natural rubber.Meanwhile, lower production has been affecting exports too. During April-February period, exports have been lower by 65 per cent, while imports surged by 122 per cent. In the 11-month period, the country shipped 15,358 tonnes of natural rubber, while it imported 157,980 tonnes. Despite higher international prices, in February, the country imported 10,236 tonnes of rubber, against 2,420 tonnes in the same month last year. International RSS-4 prices are at present quoting Rs 5 higher than domestic prices and latex prices Rs 7.50 higher. 

“Most of the exports have happened post December when domestic rubber prices came down to international levels,” said Kurien. The Rubber Board has revised its export target to 20,000 tonnes this year. In 2009-10, the country had exported 46,926 tonnes of rubber.

(mydigitalfc.com)