Rubber4U

1st January 2013 Issue

Will it be a positive outlook

The market is reacting positively on the move and the potential for some sort of patchwork type of agreement to come through before the end of the year. The markets are focused on the impact of a budget deal on economic growth in 2013. Economists warn that going over the cliff could push the U.S. economy back into recession.

U.S. President Barack Obama is holding White House talks with the top four congressional leaders - Democratic and Republican Senate leaders Harry Reid and Mitch McConnell, Republican Speaker of the House John Boehner and Democratic House Minority Leader Nancy Pelosi, as the deadline for avoiding the fiscal cliff approaches. If there is no deal by 1st January, nearly every American will see his or her taxes go up.

The worries about the fiscal cliff have been holding the oil market back. With the president cutting his vacation short, some suspect there may be a grand deal in store. Oil is rising in part on concerns of reduced oil flow out of the Kurdish areas of Iraq into Turkey over a pay dispute.

If major economies can avoid recessionary headwinds as the U.S. faces the fiscal cliff, then the investors will also focus on policy developments in China under the new leadership of the world’s second largest economy.

Natural rubber also rallied above the ¥300 per kg level for the first time since May as Japan’s currency dropped to a 27 month low on prospects for additional stimulus driven by Prime Minister Shinzo Abe’s new government. The yen slid to the lowest level against the dollar since September 2010 on expectations that the new government will push for more cash infusions to bolster the economy.

The weakening yen pushed up Tokyo rubber prices. Rubber for delivery in June advanced to ¥302.9 a kg on the Tokyo Commodity Exchange, the highest settlement for the most-active contract since May. Today, RSS4 grade rubber in India advance and closed at `.161.50 a kg and the price of RSS3 grade closed with a positive note at `.177.75 per kg at Bangkok, while Malaysian SMR 20, which Indian tyre makers prefer to import, closed at `.162.43 a kg. On the Tokyo Commodity Exchange, January futures series currently trades at ¥289 per kg, February at ¥288.6, May at ¥299.2 and June 2013 at ¥302.9 per kg.

Rubber also advanced on concern that supplies from key exporters will decline after Indonesia forecasted lower natural rubber production next year. Output in Indonesia may drop 8.9% to 2.77 million tonnes next year as the country limits production and shipments in coordination with other growers.

Read lot more in Rubber4U – 1st January 2013 issue

Interest subsidy for some exports extended

Due to hit hard by the global slowdown, the Indian government today announced additional incentives for exporters, which includes extension of 2% interest subsidy for one more year, till March 2014. The Commerce and Industry Minister Anand Sharma has also decided to grant incentive on incremental exports that would be made during January-March 2013 over the base period January-March 2012.

With these incentives, we will be able to give a push to exports in the last quarter of this fiscal. The objective is to stabilise the situation and move from negative territory to positive and keep the trade deficit under control, Commerce and Industry Minister Anand Sharma told reporters.

The South Korean tyre manufacturer - Hankook is eyeing the Indian market and is expanding its activities and aims to sell one hundred thousand tyres. Hankook will double its network of dealers from the existing 250 in the current fiscal year and has planned to strengthen its product line to address the needs of the customers and aims to have sales revenue of US$10 million by the end of the current year.

Today, RSS4 grade rubber in India closed at `.160 a kg and the price of RSS3 grade closed with a positive note at `.175.09 per kg at Bangkok, while Malaysian SMR 20, which Indian tyre makers prefer to import, closed at `.160.08 a kg. On the Tokyo Commodity Exchange, January futures series currently (Trade date: 27.12.2012) trades at ¥279 per kg, February at ¥280.7, May at ¥293 and June 2013 at ¥296.5 per kg.

Read lot more in Rubber4U – 1st January 2013 issue

China to cut import tax

The world's largest rubber consumer - China will cut import taxes on two types of natural rubber products for 2013. Natural rubber import tariffs recommended provisional tax rates: latex 10% or 720 yuan/tonne, both from low; Smoked sheets and technical classification of natural rubber 20%, or 1,200 yuan/tonne, both from low, the ministry said in a statement. The maximum tax was set at 1,600 yuan a tonne in 2012. The tax rate for technically specified natural rubber (TSNR) will also be lowered to a maximum of 1,200 yuan/tonne in 2013, down from 2,000 yuan/tonne in 2012, the ministry said.

The global natural rubber market is now in a bearish mode as demand is sluggish across the world. In India, due to poor local production and the lower price tag in the global markets import have been on the rise. India’s natural rubber import rose 32.5% to 153,855 tonnes during April to November 2012 from 115,885 tonnes in the corresponding period of previous year.

Kerala State Cooperative Rubber Marketing Federation has requested the Ministry to impose a total ban on import of rubber as well as encouraging exports by extending subsidy. The Federation also requested to grant a short term loan of `.50 crore as a need-based working capital and `.1 crore each to the member societies to reinforcing the cooperative marketing set up.

Read lot more in Rubber4U – 1st January 2013 issue

Market sentiment bearish on concerns

Rubber declined from the highest level in more than seven months on concern that U.S. budget talks were deteriorating and as gains in the Japanese currency reduced demand for yen based contracts. The yen strengthened against all of its 16 major counterparts on the U.S. budget impasse and as the Bank of Japan ends a two-day meeting, at which it is expected to expand monetary stimulus. Crude oil, used to make synthetic rubber, fell from the highest level in two months.

According to White House Communications Director Dan Pfeiffer, House Speaker John Boehner’s budget proposal would put big burden on the middle class and President Barack Obama would veto it. Failure to reach a compromise would trigger next month more than $600 billion in spending cuts and tax increases.

The World Bank has expressed concern over the Thai government's support scheme due to its high cost and large losses. While predicting that the global prices of rice and rubber - both major Thai export commodities will likely fall next year.

Spending has helped stimulate the Thai economy this year while the global economy is weakening. The World Bank urged the government to review all of its populist policies aimed at stimulating economic growth. The measures include the tax rebate for first-time car buyers, tax exemption for first-house buyers, the minimum-wage increase and a cut in corporate income tax. The current set of stimulus programmes amounts to 5.4% of GDP this year, and an estimated 2.4% in 2013.

On 21st December, RSS3 grade closed with a positive note at `.173.49 per kg at Bangkok, while Malaysian SMR 20, which Indian tyre makers prefer to import, closed at `.158.90 a kg. On the Tokyo Commodity Exchange, January futures series currently trades at ¥268.6 per kg, February at ¥271.1 and May 2013 at ¥282.5 per kg.

Read lot more in Rubber4U – 1st January 2013 issue

Growth rate to improve & RPDS application date extended

Growth in 2011-12 fell to a nine-year low of 6.5% hit by high interest rates, struggling overseas economies and sluggish investment. The expected recovery in the Indian economy did not materialize during the current fiscal year. GDP growth this year is projected to be 5.5-6 %, below last year's growth of 6.5%.

The government is doing a lot to improve growth; our expectations are that in the second half of the current year the growth rate will improve. The finance ministry has just come up with an estimate for the year as a whole at 5.7-5.9%. That means that they think in the second half, it will go to maybe something like 6% or a little about 6% in order to generate the growth, said Montek Singh Ahluwalia, deputy chairman of Planning Commission.

The Rubber Board of India has extended the last date for receipt of application for assistance for replanting and new planting under the Rubber Plantation Development Scheme to 31st December 2012. Application in the prescribed form in duplicate together with two copies of sketch of the land already planted in the year 2012 should reach in the respective regional offices of the Rubber Board.

Read lot more in Rubber4U – 1st January 2013 issue

Companies Bill 2011 and growth predictions

The Companies Bill 2011 was passed by the Lok Sabha on 18^th December, in a move that would facilitate a new set of conditions for unobtrusive regulation of corporates along with enhanced shareholder democracy. The proposed legislation will replace the existing Companies Act 1956, which was enacted 56 years ago.  Currently there are over 8,50,000 companies, where as there were only 30,000 registered companies in 1956.

The United Nations slashed its global growth predictions to 2.4% for 2013 and 3.2% for 2014. The debt crises in Europe and the U.S. and a slowdown in China could all plunge the world economy into recession, warned the UN's World Economic Situation and Prospects 2013 report. Growth in Southeast Asia helped sustain world trade through the recent crisis but fell to 5.5% in 2012 and will only recover slightly to 6% in 2013 and 6.3% in 2014. The report predicted growth in South Asia averaging 5% in 2013, up from 4.4% in 2012, led by a moderate recovery in India.

Read lot more in Rubber4U – 1st January 2013 issue

Don’t get excited, still lot more time to go

Reserve Bank of India maintained status quo on interest rates but the prospects of cuts seems in January. The inflation has been below the Reserve Bank's projected levels over the past two months.

The slowdown in the Chinese economy appears to now have bottomed out. While third quarter growth, at 7.4% y-o-y, is still low compared to last year. The World Bank raised its 2013 economic growth forecasts for China and developing East Asia. For the year 2013, World Bank expect the region to benefit from continued strong domestic demand and a mild global recovery that would nudge the contribution of net exports to growth back into positive territory. Most countries in the region have retained their strong macroeconomic fundamentals and should be able to withstand external shocks. China was expected to expand by 8.4% next year, fuelled by fiscal stimulus and the faster implementation of large investment projects.

Read lot more in Rubber4U – 1st January 2013 issue

Meet us at India Rubber Expo 2013

Cut or no cut, market expected to move upward

Reserve Bank of India will announce its mid quarter policy review tomorrow. The expectation of rate cut has increased, due to lower than expected November inflation data. The market is not expecting a repo rate cut tomorrow but expecting a cut only in January that too 25-50 bps cut in the repo rate.

Malaysian rubber prices are expected to see an upward trend on good demand for natural rubber, especially from China. China's economy is showing fresh signs of strength with improvement in manufacturing activity for December, which could help boost market sentiment. China is the world's largest consumer of rubber and its key suppliers are Thailand, Indonesia and Malaysia.

RSS4 grade rubber in India closed at `.163 a kg and the price of RSS3 grade closed with a positive note at `.170.12 per kg at Bangkok. In the domestic futures market, the January 2013 series currently trading at `.166.30, February at `.168.50 and March at `.171.50 a kg on the National Multi Commodity Exchange. On the Tokyo Commodity Exchange, December futures series closed upward at ¥267.2 per kg, January 2013 at ¥268.8 and May 2013 at ¥284.9 per kg. One can expect more action in tommorrow's market.

Read lot more in Rubber4U – 1st January 2013 issue

Rubber4U

15th December 2012 Issue

Poor economic growth due to diminished space for policy action

According to the government data, India's economic growth fell in the second quarter to 5.3% compared with 5.5% in the previous quarter, underscoring the urgency of implementing politically difficult reforms to spur a revival in Asia's third-largest economy.

The world economy is going through the fifth year of sub-normal growth this year and there’s no economy, developed or emerging, which has not been affected. Emerging markets such as India have been constantly urged to grow faster than the rest of the world economies, even though the economic problems faced by the countries are the same. If you thought India has a problem, look outside, Raghuram Rajan, chief economic adviser to the Finance Ministry, said at the Delhi Economics Conclave in New Delhi.

Finance Minister P. Chidambaram, who gave the inaugural address at the Economics Conclave in New Delhi, reiterated Rajan’s concerns about emerging economies, and blamed diminished space for policy action as the main reason for poor economic growth. The government plans to take more steps in the near future to revive the economy.

Read lot more in Rubber4U – 15th December 2012 issue

IIP bounces back

According to the official data released in New Delhi, Industrial production (IIP) growth bounced back to a 16 month high of 8.2% in October on good performance of the manufacturing, power sector and higher output of capital as well as consumer goods, indicating sudden recovery in the economy. Industrial output growth during April-October 2012 was 1.2%, less than 3.6% in the same period of 2011.

The manufacturing sector, which constitutes over 75% of the index, grew by 9.6% in October, as against a contraction of 6% in October 2011.

Read lot more in Rubber4U – 15th December 2012 issue

Growers holding back with an expectation

A peak production phase, rising imports and sluggish sentiment in the international market have affected the domestic prices. Natural rubber prices have fallen below the international prices and growers are holding the stocks with an expectation of price rise. Traditionally, domestic natural rubber prices have been marginally ahead of international prices. The domestic price touched a low of `.160 per kg last week, down by nearly `.4 from the international level. Imports have jumped this year as supply was insufficient in the earlier months. In addition to imports, a slowdown in the rubber goods sector has hit consumption, which in turn led to a fall in prices.

Indian natural rubber futures are likely to edge higher during the week on bargain hunting driven by an upward trend in overseas markets and as demand from tyre makers improved. Though rubber is the key component in manufacturing tyre, but tyre makers do not seem to be keen on a price cut to boost sales.

Today, Tokyo Commodity Exchange rubber contract for May delivery was down at ¥266.4 per kg. The benchmark contract rose as high as ¥269.2 and touched a low of ¥266.2. Kuala Lumpur market closed at `.154.68 a kg for SMR-20, while RSS3 grade at Bangkok closed at `.164.97 per kg., RSS-4 grade rubber in Kottayam closed at `.162 a kg.

Tocom rubber futures were slightly down after reaching a two-month high; however, rubber futures are supported by hopes that the U.S. Federal Reserve could unleash more stimulus at the end of its two-day policy meeting, which begins on Tuesday.

Read lot more in Rubber4U – 15th December 2012 issue

Car sales down

According to the Society of Indian Automobile Manufacturers, domestic car sales fell by 8.25% to 1,58,257 units in November 2012 compared to 1,72,493 units in the same month of 2011. Total passenger vehicles sales grew by 3.86% in November 2012 over same month last year. Motorcycle sales went up marginally to 8,67,518 units from 8,67,088 units in November 2011. Total two-wheeler sales rose by 1.23% to 11,75,429 units from 11,61,176 in November 2011.

The overall growth in domestic sales during April-November 2012 was 4.80% over the same period last year. However, in November 2012 overall sales grew marginally by 1.79% over November 2011.

The cumulative production data for April-November 2012 shows production growth of only 4.80% over same period last year. The industry produced 1,646,495 vehicles in November 2012 as against 1,816,977 in November 2011, a decline of over 9%.

Read lot more in Rubber4U – 15th December 2012 issue

An upward short run expected

Rubber prices dipped amid concerns about weaker demand as Europe's economy worsens and could lower rubber demand and the lowest new-job figures since June in the United States.

The euro zone will not start to shake off its slump until the second half of 2013, said Mario Draghi, President of European Central Bank.

Domestic natural rubber prices made further declines, though the growers are reported to be holding their stocks since the prices are running very low, selling from dealers kept the commodity under pressure. A break below the `.160 level (Low of `.159.75 per kg) during early trades on the National Multi Commodity Exchange created an almost panic situation in the local market.

On Friday, Tokyo Commodity Exchange the December futures moved down to ¥250.9 from ¥251 during the day session and then to ¥249.7 a kg in the night session for 10^th December day trade. Kuala Lumpur market closed at `.154.22 a kg for SMR-20, while RSS3 grade at Bangkok closed at `.164.85 per kg. On Saturday, RSS-4 grade rubber in Kottayam closed at `.160.50 a kg., while the key December rubber contract closed at `.162.60 per kg, January at `.164.79, February at `.167.43 and March at `.169.56 a kg on the National Multi Commodity Exchange.

The world’s fourth largest rubber exporter - Vietnam may join the International Tripartite Rubber Council of top producing nations, strengthening the group which has agreed to cut shipments to support prices. According to China Rubber Industry Association, China’s total tyre output will increase 5.9% to 483m pieces in 2012. US auto sales climbed 15% in November to 1.14 million vehicles.

Read lot more in Rubber4U – 15th December 2012 issue

Rubber ruling below Rs.164, more surprises awaits

First time in eight months the domestic natural rubber prices has gone below the international prices. Local prices were trading higher by `.8-15 per kg compared to global prices during the past eight months. Due to this scenario, natural rubber imports have been at the highest level during the past six months. During April-October 2012 period 130,966 tonnes were imported, compared to 99,760 tonnes during April-October 2011.

If the Tuesday’s scenario continues imports are expected to decrease from January 2013. On Tuesday, Kuala Lumpur market closed at `. 154.33 a kg for SMR-20, while the RSS-4 grade rubber in Kottayam closed at `. 161 a kg. On TOCOM rubber futures were trading in negative, as of Wednesday night session, December series is trading at ¥248.9 a kg, January at ¥248.8, February at ¥253, March at ¥255.6, April at ¥257.7 and May at ¥261.1 a kg.

Natural rubber import by China is likely to be lower this year, due to which the global markets will have excess supply and will be in a bearish mode for few more weeks, as demand is sluggish across the world.

Read lot more in Rubber4U – 15th December 2012 issue

Economy continues to recover gradually

Asia's third largest economy grew at 5.3% in the July-September quarter, down from 5.5% in the April-June quarter. India's manufacturing sector beat the expectations of economists to grow at its fastest pace in five months in November, boosted by strong export orders and a surge in output. The manufacturing sector gained momentum, which lifted output growth, while there is strong overseas demand for Indian goods.

Indicators of consumption such as auto sales and consumer non-durables production have shown signs of stabilisation in the past two months. But India's economic growth in the current financial year through March is likely to slip to 6% from 6.5% in the previous year.

Manufacturing output in China increased during November for the first time since July. The rate of expansion was only modest, but the quickest since October 2011. New orders rose for the second month in a row, while new export orders rose for the first time since April.

The Malaysian rubber market is likely to trade higher this week on expectations that global rubber demand will start to pick up. Thailand government's intervention plan to buy its own local rubber products could indirectly help support rubber prices, which is a positive indication.

The spot price of RSS4 grade rubber in Kottayam market closed at `.164 per kg. The price of RSS3 grade at Bangkok closed at `.164.96 per kg, while Malaysian SMR 20, which Indian tyre makers prefer to import, closed at `.154.50 a kg. On TOCOM rubber futures, December series closed at ¥250 a kg, January at ¥251.5, February at ¥254.7, March at ¥259.1, April at ¥261.3 and May at ¥263.5 a kg. On the AFET-Thailand market, January contract for RSS3 closed at 92 Baht/per kg, while STR20 closed at 88.10 Baht/per kg.

Read lot more in Rubber4U – 15th December 2012 issue

Rubber4U

Rubber4U - 1st December 2012 issue

Summit ends without deal & Thailand plans to boost rubber market

The European Union concluded a summit without a deal on the 27 member bloc's long-term budget. European Council President Herman Van Rompuy, who presides over the summits, said the constructive discussions at the summit meant an agreement could be reached early next year. He added that the national leaders had instructed him and European Commission President Jose Manuel Barroso to continue working toward consensus over the coming weeks.

Thailand plans to boost rubber market by buying 250,000 tonnes of natural rubber by March. Since May to date, the Thailand government has bought about 170,000 tonnes of natural rubber from local farmers. The purchases will be funded by a Baht 30 billion plan that was approved by the Thailand government in mid-September to buy about 300,000 tonnes of natural rubber.

Incorporated in 1971, Modi Rubber Ltd. has entered into a partnership with Japanese company – Asahi Organic Chemicals Industry Co. Ltd. for making and selling Resin coated Sand. Modi Rubber plant located at Modipuram, is mainly a export focused tyre maker, exporting to U.K, U.S, Bangladesh, Afghanistan, Syria, Sri Lanka and the Latin American countries.

Indian auto industry produced 1,829,490 vehicles in October 2012 as against 1,596,500 in October 2011, which grew by around 15%. The cumulative production for April-October 2012 shows production growth of only 4.12% over same period of 2011. 

In October 2012 overall sales grew by 14.81% over October 2011. The overall growth in domestic sales during April-October 2012 was 5.26% over the same period of 2011. Auto industry struggle continues despite festive season spurt in sales in some segments. During April-October 2012 overall automobile exports registered negative growth of 4.94% compare to same period of 2011.

Read lot more in Rubber4U – 1st December 2012 issue

Still gloomy outlook

The outlook for the tyre industry has taken a beating amid demand from domestic auto companies which are expected to fall post festive season, while the replacement market holds little hope, which has so far remained more or less stagnant. Outlook from global markets too looks gloomy amidst drought in the US and weak economic activity in Europe.

A fall in domestic natural rubber prices help raise operating profit margins and the recent decision by Competition Commission of India to clear cases against six tyre makers on cartelisation charges are seen as positives for the tyre industry. The Commission has found that there is not sufficient evidence to hold a violation by the tyre companies Apollo, MRF, J.K. Tyre, Birla, Ceat and ATMA of the provisions of section 3(3) (a) and 3(3)(b) read with section 3(1) of the Act.

India and China will be holding the Strategic Economic Dialogue in Delhi later this month with an aim of enhancing business engagement between the two countries.

Read lot more in Rubber4U – 1st December 2012 issue

Bearish trend to continue

The natural rubber market is expected to continue its bearish momentum during the week on economic problems in the US, China and Europe.

China had begun to buy natural rubber from major producing areas for its state reserves. The government plans to stockpile between 150,000 and 200,000 tonnes by end 2013 and buy 60,000 tonnes before year end to benefit local farmers. China has stockpile policies on soybeans, copper and other commodities, but rubber stockpiling is not usual.

Rubber inventories in warehouses monitored by the Shanghai Futures Exchange rose 2.3% to 64,405 tonnes last week - their highest since January last year.

The spot price of RSS4 grade rubber in Kottayam market closed at `.168 per kg. The price of RSS3 grade at Bangkok closed at `.164.92 per kg, while Malaysian SMR 20, which Indian tyre makers prefer to import, closed at `.152.73 a kg. On TOCOM rubber futures, November series closed at ¥236.1 a kg, December at ¥236.8, January at ¥239.7, February at ¥243.5, March at ¥246.1 and April at ¥248.2 a kg.

Don’t expect the rubber price to show immediate rise. Still lot more down side has to be seen, but don’t expect the price to go below `.164 a kg, in the domestic market in the normal course of time.

Read lot more in Rubber4U – 1st December 2012 issue

Reduction in petrol price

Currently international oil prices are stable and Oil marketing companies today cut the price of petrol by 95 paise per litre. Effective from midnight, petrol will cost `.67.24 in Delhi, `.73.53 in Mumbai, `.70.57 in Chennai and `.74.55 in Kolkata, per litre. Prices will vary from city to city due to differential local sales tax or VAT rates.

Petrol prices were last revised on 27th October when they were raised by 29 paise after the government increased the commission to petrol pump dealers.

 

Read lot more in Rubber4U – 1st December 2012 issue

IIP down & Japan economy shrinks

In September, India's Index of Industrial Production (IIP) fell by 0.4% from a year earlier. Manufacturing, which constitutes about 76% of industrial production, fell by 1.5% from a year earlier. In the April-September period, industrial production expanded an annual 0.1% and on the other hand, Rupee fell to a two-month low touching 55 to the dollar.

Japan's economy outperformed in the first half of this year on robust private consumption and spending for reconstruction following last year's earthquake, but it’s economy shrank in the September quarter for the first time since last year, adding to signs that slowing global growth and tensions with China are nudging the world's third-largest economy into recession.

Exports and production are likely to remain weak, and domestic demand won't increase enough to make up for the weakness in exports.

Read lot more in Rubber4U – 15th November 2012 issue

Coming days will be complex, volatile and uncertain

According to the National Bureau of Statistics, China’s inflation at the wholesale level, dropped 2.8% y-o-y in October, compared to 3.6% decline in September. But the rate of the PPI inched up 0.2% in October on m-o-m basis. The PPI figures show that the economy is rebounding slightly but still at a low level.

Malaysian Rubber Glove Manufacturers Association wants the government to defer the implementation of the minimum wage policy, which will be implemented w.e.f 1st January 2013. There will be a cost increase of RM500 for each unskilled worker and majority of them are foreign workers. The country has about two million foreign workers and that would translate into about RM12 billion a year.

Natural rubber tapping in India is going on smoothly. Rubber production peaks during October-January and starts falling from February. Some farmers are holding back material, but supplies are sufficient due to increase in imports. Tyre makers are placing more orders. They are building inventory, which indicates that there is a possibility of natural rubber prices further going down, estimated to touch a level of `.169 a kg.

Natural rubber imports in the first seven months of the current financial year rose nearly 31.3% compared to same period of 2011-12 to 130,966 tonnes. There is possibility that natural rubber imports could touch 218500 tonnes mark, which was forecasted in Rubber4U-15th August 2012 issue.

Read lot more in Rubber4U – 15th November 2012 issue

Barack Obama re-elected as President - More challenges in second term

Today, 51 year old, President Barack Obama handily defeated the 65 year old former Massachusetts governor Mitt Romney and won himself a second term in the White House. Obama's first term was dominated by the global economic crisis as the US and Europe struggled to recover from a debt crisis and a devastating recession.

Obama told supporters in Chicago, we have picked ourselves up, we have fought our way back and that for America, the best is yet to come.

Indian Finance Minister - P Chidambaram expressed the hope that economic ties with the U.S. would improve with the re-election of Barack Obama as the US President.

Read lot more in Rubber4U – 15th November 2012 issue

Tommorrow a good day, but don’t expect immediate rise

The continued concerns about Europe and now the uncertainty about the U.S election. There is some support for oil because of some expectation that the lower prices will prompt some demand.

According to International Rubber Study Group, India’s demand for both synthetic and natural rubber is expected to rise to 2.7 million tonnes by 2021. During January-September period, Ivory Coast’s natural rubber exports increased 15% to 199277 tonnes, on y-o-y basis and according to Vietnam’s General Statistics Office, the country’s rubber exports are anticipated to rise 61% to 100000 tonnes this month. Rubber inventories in the warehouses monitored by SHFE rose 5.3% to 62965 tonnes in the previous week.

The spot price of RSS4 grade rubber in the Kottayam market closed at `.174.50 per kg. The price of RSS3 grade at Bangkok closed at `.160.61 per kg, while Malaysian SMR 20, which Indian tyre makers prefer to import, closed at `.148.93 a kg. On TOCOM rubber futures, November series closed at ¥237 a kg, December at ¥237.7, January at ¥241.3.4, February at ¥243, March at ¥244.9 and April at ¥246.4 a kg.

Don’t expect the rubber price to show immediate rise. Still lot more down side has to be seen, as the economic outlook is still weak.

Read lot more in Rubber4U – 15th November 2012 issue

Increase NR output and remove inverted duty structure

All India Rubber Industries Association has asked the government to take urgent steps to increase natural rubber production and remove inverted duty structure. The import of even those raw materials, which are not indigenously produced, are subjected to high rate of custom duty, making it very difficult for the rubber industry to survive and to compete against import of finished products.

Insufficient availability of natural rubber and comparatively higher import duties on raw materials than on finished products are impacting the competitiveness rubber industry. In the current year, domestic natural rubber production is projected to fall short of domestic consumption. On the other hand, levy of anti-dumping duties on carbon black and rubber chemicals, major raw materials for the industry, has made the Indian rubber products more expensive in comparison to imported finished products, said Niraj Thakkar President of All India Rubber Industries Association.

All India Rubber Industries Association has asked for waiver of customs duty on raw materials not manufactured domestically.

Read lot more in Rubber4U – 15th November 2012 issue

Exporters want realisation period to be extended

The disappointed exporters have urged the Central Bank to at least extend the realisation period to 18 months from six months now besides ensuring that banks lend 12% of their resources as credit to exporters.

Government had extended realisation period for exports from six months to 12 months with effect from June 2008 to 30th September 2012. Since this has not been extended further, Federation of Indian Exports Organisation have urged Reserve Bank of India to give exporters time upto 18 months to realise their export commitments, which in turn will provide some relief to exporters.

Read lot more in Rubber4U – 15th November 2012 issue

RBI credit policy

The Reserve Bank of India kept repo rates unchanged at 8%, while reducing cash reserve ratio by 25 basis points to 4.25%, which will release Rs 17,500 crore into the system. Global growth prospects have deteriorated further and downside risks have increased, hence GDP growth forecast for FY13 has been cut to 5.8% from 6.5% and inflation target has been raised to 7.5% from 7.0%. Slower growth and excess capacity in some sectors will help moderate core inflation. The large current account deficit and the fiscal deficit continue to pose significant risks to both growth and macroeconomic stability. Industrial output picked up marginally in August and the services PMI showed a modest improvement in September, but the outlook remains uncertain.

Read lot more in Rubber4U – 1st November 2012 issue

International Rubber Conference begins

While delivering the key note address in the inaugural session of IRC 2012 at Kovalam-Kerala, India, Rubber Board of India, chairperson - smt. Sheela Thomas said International Rubber Research and Development Board can play an important role in evolving international cooperation in areas of mutual interest pertaining to natural rubber cultivation processing, trade and industry. A healthy relationship among all stakeholders in the rubber sector is what is required today.

Rubber Board chairperson reminded the gathering about the Board’s commitment towards bringing about positive changes in the country’s natural rubber sector.

The three day International Rubber Conference will have two days of intensive deliberations – focusing on Challenges to Rubber Industry on the first day; and Farm Mechanisation on the second day. A field trip is arranged on the third day to the rubber holdings and Rubber Producers’ Societies in Kanyakumari District of Tamil Nadu.

Read lot more in Rubber4U – 1st November 2012 issue

Government unveils medium term fiscal plan

Indian Finance Minister, P Chidambaram at a press conference unveiled a medium term fiscal consolidation plan to sharply reduce fiscal deficit to 5.3% of the GDP and reduce it to 3% by 2016-17.

The minister said the government will protect all its flagship programmes for the poor. But did not indicate any plan to decontrol fuel prices, which creates a big dent in the government’s finances. Minister expressed confidence that the CAD will be fully financed by capital inflows through foreign direct investments, foreign institutional investments and external commercial borrowings.

The Reserve Bank of India, which has time and again asked the government to take corrective measures to arrive at a credible path to fiscal consolidation, is reviewing its monetary policy tomorrow. There are expectations that the central bank may cut its policy rate.

Read lot more in Rubber4U – 1st November 2012 issue

10th IRC meet at Kovalam

International Rubber Research and Development Board, an R&D platform of natural rubber producing countries, will hold its 10th International Rubber Conference at Hotel Samudra, Kovalam in Kerala-India, beginning from Monday, 29th October till 31st October 2012.

Rubber Board of India is hosting this event. More than 400 delegates, including representatives from natural rubber producing countries, growers, nursery owners, industrialists, agri-input distributors and persons from related areas are expected to attend this event.

On Friday, as the Commerce Department reported a 2% rise in U.S. third-quarter GDP, the crude oil futures prices turned higher in hopes of rising oil demand. Prices swung from a drop of 22 cents to a gain of about 27 cents in reaction to the news.

Read lot more in Rubber4U – 1st November 2012 issue

Expecting much action today

Oil prices were mixed in Asia today as traders await the release of US third-quarter growth figures later in the day. Market opened lower with investors mostly trading cautiously following a weak lead overnight. Tokyo rubber futures for November fell and closed at ¥248.5 per kg, as investors shied away from risk due to worries about the health of the global economy. The price of RSS3 grade at Bangkok closed at `.166.83 per kg. In India, car sales fell 5.4% in September, the second consecutive monthly slide.

Chennai based Ram Charan Company engaged in the business of supplying raw materials for rubber, plastic, inks, and adhesive industries, has signed a deals worth `.120 crore with global industry leaders - with a carbon black major - Birla Carbon and Lanxess, a global polymer manufacturer, to promote their products in India.

All eyes will be on the US GDP growth figure, which will perhaps give a guide for the future plan.

Read lot more in Rubber4U – 1st November 2012 issue

Focus on growth projects having positive returns

The largest U.S. chemical maker - Dow has spent much of 2012 grappling with weak demand, but still company posted a better than expected quarterly profit, helped in by cost cuts. The company decided to slash spending on capital projects, saying the cuts will not deter the chemical maker from meeting aggressive earnings targets.

Andrew Liveris, Chief Executive of Dow Chemical said they will reduce the capital expenditure budget by $100 million in 2012 and $700 million in 2013. Reducing spending on growth projects saves cash in the short term but can limit options in the future if certain projects haven't been properly funded. Company must stop future growth projects that are no longer affordable in this environment. The company will focus on growth projects with positive returns in the far-distant future.

Dow announced another expansion project, saying it would build a world-scale synthetic rubber plant somewhere on the U.S. Gulf Coast and hopefully have it online by 2016.

Read lot more in Rubber4U – 1st November 2012 issue

Widening demand-supply gap to benefit whom

Natural rubber futures in India are likely to ease following losses in overseas markets and as supplies in local markets start improving amid sluggish demand from tyre makers, as automakers are placing fewer orders for tyres.

The consumption of natural rubber rose 5.6% to 5,01,940 tonnes in the first half of the current financial year, while production rose only 1.1% to 3,95,700 tonnes. The demand-supply gap is widening and the shortage might stand at about 1,50,000 tonnes. However, the Board does not see a shortage in the domestic market, as the projected opening stock in April stood at 2,36,275 tonnes and the rubber consuming industry is mandated to import about 1,50,000 tonnes through duty-free channels.

Currently, tyre industry address the supply crunch through imports, which have risen to 1,12,640 tonnes. Rubber imports could increase as a widening gap between local and overseas prices prompts tyre manufacturers to bring in more imports during the peak domestic natural rubber production season. Farmers are not selling now, but they are continuing tapping. Daily rubber supplies to markets are lower than normal as farmers are holding back produce. By mid-November this will lead to higher stocks and finally they will be forced to sell their produce in the uncertain market and could depress prices in the future. Even there is no improvement in natural rubber exports.

Usually natural rubber imports decreases during the October-March period when local supplies increases. Despite this, tyre manufacturers are inking new import deals as purchasing domestically is expensive. The spot price of RSS4 grade rubber in the Kottayam market closed at `.183 per kg, while Malaysian SMR 20, which Indian tyre makers prefer to import, was at `.156.57 a kg. The difference is very big. It makes imports viable even if there is a duty on imports.

Considering the current pace of imports, the total import would likely exceed 2,50,000 tonnes by the end of current financial year. Indian tyre makers are gradually trying to bring down their dependency on local supplies.

Read lot more in Rubber4U – 1st November 2012 issue

Imposition of anti-dumping duty on non-radial bias tyres

The Finance Ministry has imposed definitive anti-dumping duty on non-radial bias tyres (used in buses and trucks) from China and Thailand. This duty will be valid for a period of five years. The anti-dumping duty will also be applicable on certain tubes and flaps.

In the case of imports from Thailand, the anti-dumping duty has been pegged at $0.86/kg. While imports from China, the anti-dumping duty has been pegged at $1.12/kg for tyres produced by Hangzhou Zhongce Rubber Co. Ltd. In all other cases of imports from China, the anti-dumping duty has been pegged at $1.31/kg.

Read lot more in Rubber4U – 15th October 2012 issue

Rubber to remain weak as import rises

Europe continues to muddle through its crisis management and with the euro zone debt crisis severely undermining economic activities in Europe and dealing a blow to the world’s growth engine China, which counts Europe as its key export market, the ripple effect is spreading to the rest of Asia.

Amidst concerns over global economic growth, drop in crude oil weighed on the overall market sentiments. Brent crude was at $114.67 a barrel and US crude was down at $91.64 a barrel. Yet, steep falls in natural rubber prices are likely to remain restricted as Thailand, Indonesia and Malaysia are likely to intervene if prices drop below $2.70 a kg.

Once again, the economic slowdown in China is seen as the culprit. Weaker exports due to slack demand in the U.S. and Europe have reduced demand for new trucks and truck tyres in China. Sluggish investment in mining and construction equipment globally has also reduced the growth in demand for natural rubber used in tyres.

In September, India's natural rubber imports rose nearly 16% to 14,779 tonnes as tyre manufacturers increased imports due to lower prices in international markets. Natural rubber import rose by 24% to 1,12,640 tonnes in the April—September period of 2012 from 91,186 tonnes during the same period of previous year. Natural rubber production during September rose to 82,000 tonnes from 80,200 tonnes a year ago.

Prices are under pressure due to lower buying from tyre makers, who have been raising imports to trim dependency over costlier local rubber. The key November rubber contract closed at `.185.37 per kg on the National Multi Commodity Exchange. The spot price of the most-traded RSS4 grade rubber in Kottayam fell by `.6.50 to 188.50 per kg, since 1^st October 2012. On 12^th October the Tokyo Commodity Exchange, October futures series closed in negative at ¥257.5 per kg and current trade session for 15^th October is also trading in negative zone at ¥252.6 per kg, which indicates a further downward movement for domestic market.

Read lot more in Rubber4U – 15th October 2012 issue

Prices slip as demand worries grow

Crude oil prices fell on Wednesday after hitting three-week peaks as global demand worries trumped supply concerns linked to simmering tensions in the crude-rich Middle East. After reaching almost three-week highs, at $93.66, the New York WTI contract tumbled into negative territory in late trade in a technical correction heightened by demand fears.

Rubber market also seems to be witnessing a correction after rallying higher in the recent weeks. However, fundamentals remain supportive, as stimulus measures are likely to raise demand.

RSS4 grade rubber in India closed with a negative note around `.190 a kg and the price of RSS3 grade closed at `.173.95 per kg at Bangkok. In the domestic futures market, the October series closed at `.191.66, November at `.186.40, December at `.185.04 and January 2013 at `.186.58 a kg on the National Multi Commodity Exchange. On the Tokyo Commodity Exchange, October futures series currently trading in negative at ¥260.8 per kg and March 2013 at ¥267.9 per kg, on 11^th October.

The three major rubber producing countries had agreed in August to cut down rubber trees and trim exports by 300,000 tonnes, in an attempt to curb declining global rubber prices, which came into effect on 1st October 2012. The government will bear the holding cost for the rubber industry, if exporters need to stop selling, in a move to support the price.

Malaysian Minister of Plantation Industries and Commodities, Tan Sri Bernard Dompok said that the tripartite agreement between Thailand, Indonesia and Malaysia would cut off 300,000 tonnes in proportion with the rubber we produced. Price mechanism would kick in should the tyre-grade SMR20 fall below US$2.70 per kg.

Read lot more in Rubber4U – 15th October 2012 issue

Rubber to ease on weak demand

Vietnam has agreed to participate in the December meeting of the International Tripartite Rubber Council, suggesting the possibility of becoming a new member of the council. If Vietnam agrees to join, up to 80% of the worlds rubber exports will be represented by the group.

Concern of slowdown in World economic growth is weighing on oil prices after World Bank has cut China’s growth outlook to 7.7% from 8.2 % estimated in the month of May. Most of the market has come under pressure before the IMF meet on World economic outlook which is creating anticipation of further slowdown.

Natural rubber futures are expected to make a downward moment this week on rising supplies, a drop in the overseas markets and weak demand as tyre manufacturers increases imports. Prices are also under pressure due to lower buying.

As rainfall has stopped, tapping in Kerala has picked up. It’s the beginning of rubber production peaks season (during October-January). The key November rubber contract closed lower at `.182.30 a kg on the National Multi Commodity Exchange. The spot price of RSS4 grade rubber in the Kottayam market closed at `.191 per kg.

Tyre makers are raising imports, despite paying the import duty; they are cheaper than local supplies. Imports jumped 21.2% to 95,047 tonnes in April-August from a year earlier.

Although thin supplies in local spot markets are likely to restrict the downside. Farmers are holding back supplies. They are selling negligible output in the market. Tight supplies are giving support to prices.

Read lot more in Rubber4U – 15th October 2012 issue