Exporters see demand drop

The prices of natural rubber continued to fall, pushing down the growth in the commodity's global supply this year to 5.6% (to 10.023 million tonnes) from an earlier estimated growth of 6%. The current indications are that the price fall started impacting on the supply. The total supply from member countries of the ANRPC, which grew annually at 10.6% in Q1 and 10.7% in Q2, had slowed down to 2.5% in the third quarter. It is expected to slow down further to 0.6% in the fourth quarter.

According to a rubber exporter from South Sumatra - Indonesia, the rupiah’s recent weakness gives rubber producers room to breathe despite lower rubber production and a possible price drop. The country is entering a heavy rainy season, which will reduce natural rubber production.

Rubber prices are down to just above $3 per kg, compared to $6.4 per kg in February. The price drop stems from worries about the economic slowdown in European countries, which account for 11% of total global demand for natural rubber. Demand from the 11 members of the Association of Natural Rubber Producing Countries, which account for 57% of global consumption, is estimated to rise 2.9% next year to 6.3 million tons.

The dollar could be volatile for the next month, or until political leaders find a solution to the euro zone crisis. Asian currencies will rise again in six to nine months’ time as investment returns to the region.

Read lot more in Rubber4U – 1st December 2011 issue

Defaulters to be blacklisted

The top NR producing countries are blacklisting the buyers who have failed to honour their contracts after the panic selling in the physical market. Thailand, Indonesia and Malaysia backed off from a plan to boost up rubber prices at a meeting in Bangkok, but pledged to prevent defaults from recurring after buyers, mostly from China, wanted to renegotiate contracts as prices plunged to US$3 a kg.

There have been some contract defaults and that was mentioned in the weekend meeting in Bangkok, that's why we need to stop further defaults by blacklisting those buyers who have defaulted. The group was assessing the number of defaulted cargoes and would send the names of errant companies to the International Tripartite Rubber Council (ITRC). Other exporter associations in Indonesia and Malaysia would be doing the same, so that the ITRC can blacklist them, said Pongsak Kerdwonbundit, president of the Thai Rubber Association.

Read lot more in Rubber4U – 1st December 2011 issue

Speculators creating heavy volatility

According to Forward Market Commission (FMC), Futures trading in natural rubber was 23 lakh tonnes during the year 2010-11. But physical delivery of natural rubber in futures market was just 16,000 tonnes. Rubber Board has already made a recommendation for reduction in intraday circuit limits in futures trading.

The natural rubber consuming industry has written to FMC to either put rubber futures on hold or keep intraday price fluctuation limit from the current 4% to 1%. All India Rubber Industries Association (AIRIA) president Vinod Simon says that speculation in domestic futures gave least consideration to demand-supply fundamentals. It is quite puzzling why should domestic natural rubber prices hold significantly higher than international prices when we are in midst of peak production months and carrying more than 2.5 lakh tonnes as suggested by Rubber Board.

Automotive Tyre Manufacturers Association (ATMA) has also pointed to speculation in futures impacting the spot market. The recently expired November contract had open position of 1,491 tonnes on 1st November, and stocks in warehouses of just 110 tonnes. This held the contract under pressure till expiry. Resultant trends were just not in sync with fundamentals.

The intraday circuit limits were increased to 4% to increase liquidity as natural rubber prices had dropped significantly three years ago. However, at current prices, the futures can be legitimately taken up or down by Rs.8 a kg on the same day.

Today, the spot rubber RSS-4 grade closed at Rs. 190 a kg at Kottayam. The December series slipped to Rs 191.80, January to Rs 193.50, February to Rs 195.25 and March to Rs 197.25 a kg on National Multi Commodity Exchange (NMCE). RSS-3 grade increased to Rs 173.73 a kg at Bangkok. The November futures finished marginally higher at ¥254.08 on Tokyo Commodity Exchange (TOCOM).

Most probably on 18th November Indian Stock Market will open in red and if so happens then one can expect domestic natural rubber prices moving further down.


Read lot more in Rubber4U – 1st December 2011 issue

NR in weak territory

India has been increasing fuel prices in order to ease its fiscal burden and inflation in double digit. The hike in petrol prices and also hike in interest rates has impacted the auto sector, resulting in weak demand for the vehicles. The sluggish growth in auto sales has impacted the rubber goods manufacturing sector also.

Most probably the next opening of Indian Stock Market may be in red and if so happens then one can expect domestic NR prices moving further down. On 9^th November, as predicted RSS4 grade closed (below our forecasted figure made on 1^st November) at Rs. 196 a kg at Kottayam, RSS3 grade in the international market at Bangkok closed at Rs 174.70 per kg, SMR-20 closed at 171.97 a kg at Kuala Lumpur. At Tokyo Commodity Exchange futures prices for November delivery closed at ¥264 a kg, for December delivery closed at ¥265.7 a kg and ¥270.7 a kg for March 2012 contract.

Natural rubber continues to remain in the weak territory and further downward trend can be expected during the week, with a strong support at Rs. 185 per kg.

Read lot more in Rubber4U – 15th November 2011 issue

Expecting further fall in rubber prices

Natural rubber continues to remain in a weak territory. The developments in Greece, Italy and uncertainty over global economic growth, eroded all the optimism that prevailed in the market. The reports of high inventories and Chinese buyers wanted to renegotiate contracts after NR prices fell below $4 a kg. and tracking global markets, natural rubber prices in the Indian market plunged too. The most active Dec Futures on NMCE closed at 205.64 a kg, while in the physical market RSS4 closed at Rs. 200 a kg.

Natural rubber prices turned weak, as global economic uncertainty is casting dark shadows over its demand, there is no selling pressure from dealers or growers and the market lost ground on buyer resistance. Sentiments were also affected by the fall in stocks and commodities around the globe, though the local markets still experienced short supplies. Spot market prices dropped tracking sharp losses on the National Multi Commodity Exchange (NMCE). At NMCE, rubber future prices for November delivery closed at Rs 205.64 per kg and at Rs. 206.50 per kg for March 2012 delivery. RSS4 grade closed at Rs. 200 a kg at Kottayam, RSS3 grade natural rubber in the international market at Bangkok closed at Rs 180.20 per kg, SMR-20 closed at 176.36 a kg at Kuala Lumpur. At Tokyo Commodity Exchange futures prices for November delivery closed at ¥273 a kg, for December delivery closed at ¥275 a kg and ¥280.2 a kg for March 2012 contract.

On 1^st November, we have forecasted that NR price in the domestic market once again will fall to Rs. 198 per kg in near future, when the NR prices were at Rs. 212 per kg.

Read lot more in Rubber4U – 15th November 2011 issue

Proposed tax hike may impact the industry

Natural rubber prices in the international and domestic market continued to decline as uncertain global macro economic conditions raised concerns over the demand. Compared to the international market, losses in the Indian markets were limited probably due to weakening rupee which is limiting imports.

India Government is likely to impose additional tax diesel cars which may affect the country’s automobile and natural rubber industries adversely. If the proposed tax comes into effect, the passenger car sales may show lower growth rate, which in turn may affect rubber industries. Demand for the finished product and in turn for raw material may decrease. Decision for increasing the tax is to raise the much needed revenue for the country. All efforts are being made to ensure the fiscal deficit target of 4.6% of GDP is met. The Finance Minister is expected to take the decision after assessing the indirect tax collection figures for October 2011.

The latest price of RSS3 grade natural rubber in the international market at Bangkok closed at Rs 194.82 per kg., SMR-20 closed at 186.77 a kg at Kuala Lumpur and on the other hand domestic RSS4 grade closed at Rs. 211.50 a kg at Kottayam. At Tokyo Commodity Exchange futures prices for November delivery closed at ¥291.4 a kg and ¥296.4 a kg for March 2012 contract.

Weak sentiments exist in the market, a pull back towards Rs. 215 per kg in the domestic market had been seen and once again a fall to Rs. 198 per kg may be possible in near future.


Read lot more in Rubber4U – 15th November 2011 issue