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