Wednesday, December 30, 2015

Gloomy year comes to an end with little sparkle

After plunging 48% in 2014, the crude oil price has fallen another 36% since the end of last year. Rubber product makers and exporters may continue to see growth as natural rubber prices may continue to stay low because of low crude oil prices.

Global demand for natural rubber is slowing as the economy cools in China. Supplies are expanding after a decade-long rally in rubber prices to a record in 2011 encouraged top producers like Thailand, Indonesia and Vietnam to plant more trees. Output will exceed use for two more years, with the surplus quadrupling in 2016. Global production is set to exceed demand by 411,000 tonnes next year and by 430,000 tonnes in 2017, compared with a surplus of 98,000 tonnes in 2015, according to The Rubber Economist Ltd., a London based industry researcher.

Rubber traded in Tokyo has tumbled 71% from a record in 2011, touching a six-year low of ¥153 a kg on 6th November 2015. Tokyo rubber prices climbed more than 14% to 174.8 yen at the beginning of December from a six-year low of ¥153 a kg. The Tokyo Commodity Exchange rubber dropped to a one-month low on 29th December, stretching its losses into a fourth consecutive session, as slowing demand from top consumer China and weakness in crude oil.

Crude oil prices still remained under pressure on fears of slowing demand added to worries over near-record global production levels. Natural rubber prices often follow moves in crude oil as the commodity competes with synthetic rubber and the market is concerned about slowing economic growth in China.

United Planters Association of Southern India (UPASI) has said cheap imports are harming the rubber industry. It wants the government to introduce safeguards to protect domestic players. "With damage to domestic industry being evident, government should play its role as regulator and introduce safeguards to limit imports. The recommendations of the Parliamentary Standing Committee on the rubber industry in India have clearly stated that uncontrolled imports are harming the growing domestic industry," said Dharmaraj, president of UPASI.

The benchmark RSS4 grade rubber closed at `.102.50 a kg at Kottayam, while RSS3 grade closed at `.79.94 a kg at Bangkok and Malaysian SMR20 closed at `.75.60 a kg. On National Multi Commodity Exchange January 2016 futures closed at `.103.91 a kg, February at `.105.70 and March closed at `.108.04 a kg. On Tokyo Commodity Exchange, January 2016 futures series closed at ¥147.3 a kg, February at ¥149.9, March at ¥153.1, April at ¥166.6, May at ¥157.7 and the contract for delivery in June 2016 closed at ¥159 a kg. It is definitely going to be an interesting year in 2016 in terms of the economy and financial markets.

To read Rubber4U – 1st January 2016 issue: for latest forecast
For 2015-16 Rubber Forecast:

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