GDP growth at 5.5%

Indian economy expanded more than estimated at 5.5% pace on year in Q2, after 5.3% expansion reported in the preceding quarter, but prospects of growth are worrisome as manufacturing activity remains weak.

Growth in Asia's third-largest economy has slowed sharply over the past year due to weak industrial activity dragged by high interest rates. Economists expected a 5.2% - 5.3% growth.

Read lot more in Rubber4U – 1st September 2012 issue

Prices fall on rejection of extra funds to buy rubber

Tocom rubber futures settled lower after market participants were disappointed about the Thai government not allocating additional funds to its price intervention plan. On TOCOM rubber futures, as of 29th August at 02:35 JST, September series were trading at ¥219.8 a kg, October at ¥220.4, December at ¥222.6 and February 2013 at ¥224 a kg.

An intervention scheme launched in January has failed to raise unsmoked rubber sheet (USS3) to anywhere near the targeted price of 120 baht per kg and the government has bought only a fraction of the planned 200,000 tonnes. For the time being, Thailand cabinet has rejected the plan to spend another 15 billion baht on buying rubber to boost prices. Two billion baht from the budgeted 15 billion baht has been left for further buying. 

On 27^th August, the Thai Rubber Association said the export ban in Thailand would take effect from October 2012.

Now demand for rubber has dropped due to slowdown in the euro zone and other countries. Worries about defaults by Chinese buyers have added to the gloom. In the current scenario there seems to be no positive news and Tocom prices may fall further down during the week.

Read lot more in Rubber4U – 1st September 2012 issue

Market still lack confidence

Rubber futures gained at Tokyo Commodity Exchange tracking US economic data which showed mixed trends. January futures gained immediately after the three major producers - Thailand, Indonesia and Malaysia announced measures to cut exports and trim production. Fundamentals are not supportive for rubber although firm crude oil prices are providing firm support and partly on hopes that the US, Europe and China would do more to increase growth in their respective economies.

On TOCOM rubber futures, August series is currently trading at ¥209 per kg, September at ¥217.4, December at ¥222.2 and January 2013 at ¥223.8 a kg. The market is still lacking confidence, which can be noticed in 27^th August current trading for August delivery.

Earlier, rubber growers in Thailand’s southern provinces had rallied at the Provincial Administration Office and set a 15 day deadline for the government to resolve the declining price of natural rubber.

The top three rubber producers, under the International Tripartite Rubber Council, will establish the mechanism to ensure that natural rubber price remains stable and is expected to meet in the first week of September at Bandung-Indonesia. Two major rubber importing countries - China and India is also expected to attend this meeting.

Before these measures comes into effect, natural rubber prices are bound to rise, as a safety measures to be taken by the consumers having future outlook. Practically speaking is it possible for the grower to trim production or the countries to cut export?

Read lot more in Rubber4U – 1st September 2012 issue

Forecast for 2012-13

Rubber4U Forecast for 2012-13

On price drop, defaults happen

The weak global economy has driven down prices for everything and one of the hardest hit commodities – natural rubber, is trying to fighting back. The prices of natural rubber hit a record high of ¥528 a kg in February 2011 and later fell to nearly three year low and August series currently trading at ¥214 a kg. The drop in price was mainly contributed by negative market sentiment caused by various factors including uncertainties in global economic growth. Weaker oil prices make synthetic rubber, an alternative petrochemical rubber grade, cheaper and normally encourage investors to liquidate natural rubber contracts on TOCOM to avoid risk.

The top three rubber producers, under the International Tripartite Rubber Council, had agreed to reduce exports by 300,000 tonnes and to accelerate the replanting programme of 100,000 hectares, which will result in further reduction of export by 150,000 tonnes. With these two measures, a total of 450,000 tonnes of natural rubber will be withdrawn from the market, hoping to boost prices.

According to some dealers, fears of defaults gripped the rubber market and whenever prices drop, defaults happen, with the price of some tyre grades already falling nearly 30% since January because of weaker Tokyo futures and ample supply in Southeast Asia. Late last year, the ASEAN Rubber Business Council blacklisted buyers who defaulted on shipments and urged members to ignore requests from Chinese buyers for discounts following a plunge in prices.

In the 1st August 2012 issue of Rubber4U, we had forecasted that domestic RSS4 grade rubber price to touch `.168 per kg, which happened on 14^th August. Hence, we request our readers to be in touch with our website. 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 – 1st September 2012 issue

Steps will have a positive outcome

Rubber plunged 43% in the past year and reached the lowest in almost three years as growth slowed down. Demand in China may drop 5% this year as declining truck sales cut tyre use, but China’s imports are still growing.

The International Rubber Consortium Ltd. is an arm of the International Tripartite Rubber Council, which represents growers and exporters from the three countries. State agencies from the three countries and an exporter representative from Thailand participated a one-day meeting in Bangkok.

Thailand, Indonesia and Malaysia, representing about 70% of global natural rubber supply, have agreed to cut exports of natural rubber by 300,000 tonnes in an attempt to boost prices. Under the agreement, Thailand will cut its rubber exports by 150,000 tonnes. The remaining 150,000 tonnes will be shared by Indonesia and Malaysia. The steps will have a positive outcome, moving prices higher.

Thailand may raise the budget to buy rubber sheets from local farmers above market rates and increase locations for purchases to cover all growing regions. The country announced in May plans to buy more than 10,000 tons in Tokyo and Shanghai to boost prices. The plan will be presented for cabinet approval on 21st August.

Read lot more in Rubber4U – 1st September 2012 issue

Protesters demand to solve the problem of low prices

Thailand rubber growers in the southern province of Surat Thani rallied in front of their respective provincial halls on 15th August, demanding that the government urgently solve the problem of low rubber prices. The protesters handed their written demand to Prime Minister Yingluck Shinawatra through Surat Thani governor Cherdsak Chusri. They called on the government to intervene in the domestic market by purchasing raw rubber at 120 baht per kg.

Thailand is building inventories and cutting aging trees, local rates have fallen 33% from this year's peak to the lowest level since November 2009.

Read lot more in Rubber4U – 1st September 2012 issue

NR prices weakening due to lack of demand

Tokyo rubber futures currently trading at low level of ¥203 a kg. for 14^th August session, on concerns about weakening demand for the commodity. China's factory output growth slowed unexpectedly last month to its weakest in more than three years and demand for automobiles slowed further in July from the previous two months. Supply in Thailand has been picking up smoothly in the last couple of months since farmers resumed tapping after the end of dry season, another factor putting a downward pressure on prices.

According to reports, the investors in Europe have restricted their investment activities over riskier assets on the rising worries over Euro zone crisis. Today, RSS4 grade rubber prices declined to `.172.50 per kg at Kottayam. In the domestic futures market, the August series is currently trading at `.172.95, September at `.164.10, November at `.161.99 and December at `.163.80 a kg on the National Multi Commodity Exchange. On TOCOM rubber futures, August series closed at ¥206 per kg, September at ¥206.7, December at ¥212.5 and January 2013 at ¥213.9 per kg.

Read lot more in Rubber4U – 15th August 2012 issue

Win-win situation for both the countries

Indian rubber industry has been invited to invest in Indonesia to increase bilateral trade. In a meeting with All India Rubber Industries Association (AIRIA), Dickey Fabrian, Counsel General of the Republic of Indonesia in India, invited the Indian rubber industry to start their rubber manufacturing units in Indonesia, as the country had abundant natural rubber, low cost labour, power and friendly government policies.

A high level Indonesian delegation was likely to participate in India Rubber Expo 2013 to be held in Mumbai in January to further strengthen the ties between rubber goods manufacturers of both the countries. It will be a win-win situation for both the countries. India had gained enormous expertise in production of rubber components and other rubber products. On the other hand, Indonesia had a vibrant natural rubber sector and would wish to develop manufacturing of rubber products, said Niraj Thakkar, sr. vice president of AIRIA.

Indonesia has also invited investment in rubber plantation through lease of land.

Read lot more in Rubber4U – 15th August 2012 issue

Smuggling cases on the rise

India’s natural rubber production during July went up 2.6% to 66,000 tonnes, while production during the first four months of the current financial year was at 240,000 tonnes. Natural rubber imports during July fell by more than 14% to 17,084 tonnes, while in the first four month import jumped nearly 27% on year 76,666 tonnes as in first three months tyre makers aggressively imported natural rubber.

The consumption of natural rubber during July 2012 went up to 83,000 tonnes from 81,210 tonnes a year ago.

On receiving several complaints regarding natural rubber being smuggled from Kottayam to other states through Kaliyikkavila route, the Rubber Board has initiated steps to intensify patrolling from its regional centre in Marthandam-Tamil Nadu, which will check all documents required for inter-state transportation. Since smuggling cases were on the rise, the Board has entrusted the job to its flying squad to comb this area.

Today, Indian sheet rubber prices declined to `.174 per kg. In the futures market, the August series is currently trading at `.176, September at `.166.75, and December at `.167.40 a kg on the National Multi Commodity Exchange. RSS3 grade dropped to `.157.33 a kg at Bangkok. On TOCOM rubber futures, August series closed at ¥211 per kg, September at ¥211.3, December at ¥217.5 and January 2013 at ¥219 per kg.

According to the International Rubber Study Group (IRSG), China’s rubber consumption may rise to 8.7 million tonnes in 2012 and 9.1 million tonnes in 2013 up from the figure of 8.3 million tonnes in 2011.

Read lot more in Rubber4U – 15th August 2012 issue

ECB disappoints the market

Key TOCOM rubber futures slipped on Thursday as disappointment that the European Central Bank (ECB) did not offer more immediate steps to boost economic growth. The ECB left its benchmark interest rate unchanged and ECB President Mario Draghi largely repeated previous bank policy at his monthly news conference, leaving open the possibility of future action.

U.S ISM’s Production Index registered 51.3% in July, which is an increase of 0.3% point over 51% reported in June 2012. This indicates growth for the 38th consecutive month. Plastics & Rubber industry is one of the four industries reporting growth in production during the month of July.

U.S auto sales rose a lower than expected 9% in July as high U.S unemployment and weak consumer confidence kept would-be buyers on the sidelines. Tyre grades from Southeast Asia were traded at their weakest in at least four years as Tokyo futures dropped, but top consumer China could buy more cargoes to exploit the low prices. The key Tokyo Commodity Exchange rubber contract for January delivery closed at ¥231 per kg. The benchmark contract fell to as low as ¥227.9 and on Friday one can expect to see a price of ¥226 a kg.

Markets on Friday will focus on the key U.S July nonfarm payrolls report, expected to show only a modest improvement in hiring from June's moderate employment growth.

Read lot more in Rubber4U – 15th August 2012 issue