Fresh fears of recession

Financial markets have wrestled for several days with fears that a new recession in the US is in the offing. Today stock markets plummeted amid signs of a possible recession and worries over the health of Europe's banks. WTI Crude Oil price were trading at $80.39 and Brent Crude Oil at $106.08 a barrel at IST 4.10 p.m. According to a survey manufacturing in the mid-Atlantic region contracted in August by the most in more than two years.

The price of RSS3 grade natural rubber in the international market at Bangkok today closed at Rs 211.07 per kg., SMR-20 closed at 205.54 a kg at Kuala Lumpur and on the other hand domestic RSS4 grade closed at Rs.198.50 a kg at Kottayam.

The future markets both domestic and international also have been down, which have further affected the domestic spot prices. At the National Multi Commodity Exchange (NMCE), rubber future prices for September delivery closed at Rs 199.11 per kg. At Tokyo Commodity Exchange futures prices for September delivery closed at 348 yen/kg.

Read lot more in Rubber4U – 1st September 2011 issue

Definitive anti-dumping duty goes

The three-member Bench of the Customs, Excise and Service Tax Appellate Tribunal has set aside the levy of definitive anti-dumping duty on truck/bus radial tyres and tubes imported from China and Thailand. The verdict would hopefully provide relief to radial tyre users in the country.

All India Tyre Dealers' Federation (AITDF) hailed the Tribunal decision. In a statement AITDF said that ever since the anti-dumping duty of $32 to $90 per tyre was clamped, import of truck/bus radials had crashed in the replacement market that relies heavily on Chinese and Thai products.

Domestic tyre prices had soared in the last 18 months, since January, though natural rubber prices had come down significantly from the peak of Rs 243 a kg on 5^th April to Rs 203.50 a kg. The Federation hoped that in the coming weeks the import of truck/bus radials would gain momentum to revert to the pre-anti-dumping duty levels.

Read lot more in Rubber4U – 15th August 2011 issue

Boon for India

Oil prices have come down by 15% from its recent highs and it is expected that other commodities too will follow the same trend. Standard & Poor’s (S&P) has downgraded US Economy’s Long-Term Sovereign Credit Rating to AA+ from AAA with a negative outlook, which is good for India, as it will help the Reserve Bank of India in its battle against inflation.

If the US goes into recession, it is expected that Brent prices may come down to $80/bbl, which will have a positive impact on India’s current account. Not only will this help battle inflation, it will also keep fiscal deficit in check.

While the short-term impact would be more obvious in terms of market uncertainties (Stock market will open in 300 negative on 9^th August), the long term impact may be more prolonged. But uncertain global environment could however depress India’s exposure to global markets, which in turn may have an effect on India’s GDP growth.

Many experts believe that India should be able to withstand any possible problems following S&P’s US downgrade. However, S&P has warned that even as there is no immediate impact on the Asia-Pacific sovereign ratings, the potential longer-term consequences of a weaker financing environment, slower growth and higher risk aversion are the negative factors.

Read lot more in Rubber4U – 15th August 2011 issue

Can NR import rise?

In the current scenario, there are concerns that India’s natural rubber consumption growth could slow in 2011-12 as auto sales are falling, hitting tyre demand from original equipment manufacturers (OEMs), but there is demand from the tyre replacement segment which will drive growth.

When it is expected that domestic prices most of the year is likely to remain lower than international prices because of the change in duties, then how it is possible that there will be a major rise in import. If import has to increase, then the domestic prices has to go above the international prices that too with a minimum gap of Rs 20 per kg., then only import will be viable. One more important thing is the stock level, which is at 2,47,442 tonnes as of June, compared with 1,80,697 tonne a year ago.

The growers are holding stocks in the hope of higher prices in future, which in turn has created short supply in the market, hence imports are taking place and also due to concessional duty import.

It is expected that India’s 2011-12 natural rubber production will rise due to good monsoon in the southern state of Kerala.

Read lot more in Rubber4U – 1st August 2011 issue