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

Intervention price level at $2.70 a kg

The major natural rubber producing countries have set up a price support mechanism to prop up the rubber prices, if the price falls below $2.70 per kg, which was fixed when officials from the Southeast Asian countries met in Thailand to review measures to support the market.

Physical prices are well above $3.00 per kg after the three countries agreed in August to cut exports and replant trees to shore up the market. Today, RSS4 grade rubber in India closed with a negative note around `.195 a kg and the price of RSS3 grade closed at `.173.58 per kg at Bangkok. In the domestic futures market, the October series were trading at `.192.75, November at `.187.80, December at `.185.65 and January 2013 at `.186.40 a kg on the National Multi Commodity Exchange. On the Tokyo Commodity Exchange, October futures series closed at ¥264.2 per kg and March 2013 at ¥269.8 per kg.

Traders cast doubt on the effectiveness of the scheme, the market has gone up on the occasion of announcements but in fact, prices are being directed by crude oil and the global economic scenario.

Read lot more in Rubber4U – 15th October 2012 issue

Wait and watch for the effect of reform

The Indian Cabinet approved the draft of 12th Five Year Plan (2012-2013 to 2016-2017) document, which would be placed before the National Development Council. The revised draft of the Companies Bill 2011, which was prepared based on recommendations of the Standing Committee, was also approved by the Cabinet and will be introduced in the winter session of Parliament. If approved, it will replace the old Companies Act, 1956.

As per the government’s claim, the legislation will help make the corporate sector more transparent, efficient and responsible, but experts feel some of its provisions will hit corporates hard and will have far reaching consequences.

Most probably today, Indian markets will witness a bad patch.

Read lot more in Rubber4U – 15th October 2012 issue

NR prices likely to touch Rs.201 a kg shortly

Thailand continued to intervene in the rubber market although prices have rebounded largely due to the prospect of rising demand after the Federal Reserve launched a new stimulus programme for the US economy. Major rubber producing countries began cutting exports since 1^st October, by reducing supplies of 180,000 tonnes of exports in the fourth quarter and 120,000 tonnes in the first three months of next year.

Today, the price of RSS4 grade closed at `.177.14 per kg at Bangkok. In the domestic futures market, the October series is currently trading at `.197, November at `.193.50, December at `.192.50 and January 2013 at `.191.77 a kg on the National Multi Commodity Exchange. After rallying 33% since mid-August on the Tokyo Commodity Exchange, futures were further boosted by concerns about supply restrictions and are trading higher, October series trading at ¥269 per kg and March 2013 at ¥273.10 per kg.

India’s natural rubber consumption rose 5% to 4.20 lakh tonnes, while production grew marginal 0.8% to 331700 tonnes in April-August 2012 on y-o-y basis. Eurozone debt crisis, weak demand from tyre industry and recent bearishness in crude oil prices could limit gains in NR prices. But, bullish trend will probably continue when Chinese markets reopen and most probably RSS4 grade will touch `.201 a kg., in short run.

Read lot more in Rubber4U – 15th October 2012 issue