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