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