New Year - Rubber4U Issue

Rubber4U - 1st January 2014 issue

Challenging cheerful year ahead

The rupee hit all-time lows against the U.S. dollar in late August amid a global emerging market sell-off and concerns about India's record current account deficit. While the currency has clawed back some ground since new RBI governor took office in September.

The governments of many countries have doled out economic stimulus packages for the automotive industry to add vigor to automobile manufacturing, which have led to an increase in the level of production and demand for tyres. Tyres are not only used in new vehicles, but need to be replaced in old vehicles as well due to wear and tear. Replacement is also a major market for tyres, which is steadily growing.

Imports became controversial since prices that rose to over `.195 a kg in August and dropped to around `.150 a kg during the first half of December. Prices have recovered to some extent, primarily after the government revised import duty to 20% or `.30 a kg, whichever is lower, which came into effect from 20th December 2013. Government has kept the ad valorem rate at the same level, while the specific rate is fixed. The specific rate will come into play when prices of imports fall.

In June, a positive response from the shareholders clears the path for Apollo Tyres to complete the merger process and expects to close the transaction by year end and it was slated to be the single largest outbound deal in India’s automotive industry. But US based Copper Tire & Rubber Company said it was terminating the stake sale arrangement with Apollo Tyres Ltd.

The Asian market is expected to provide a boost to the tyre industry. The U.S. and European region is projected to witness a growth below the global average, which is boosted by rubber requirements in China. Latin America and the Middle East are also expected to up the demand for tyres due to increased automotive production in the regions.

On the last day of the year, RSS4 grade closed at `.164 a kg at Kottayam. On Monday, National Multi Commodity Exchange January 2014 futures closed at `.166.55 a kg, February at `.169.05, March at `.171.92, April at `.174.90 and May at `.176.25 a kg. Tokyo Commodity Exchange, January 2014 futures series closed at ¥279.8 a kg, February at ¥275.9, March at ¥273.8, April at ¥272.9, May at ¥273.7 and the contract for delivery in June 2014 at ¥274.5 a kg. While RSS3 grade closed at `.157.49 a kg at Bangkok and Malaysian SMR20 closed at `.142.08 a kg, on Friday.

Rubber4U wishes all its readers and well-wishers a Happy & Prosperous New Year

It's time to move forward

The agreement which was slated to be the single largest outbound deal in India’s automotive industry, has collapsed. US based Copper Tire & Rubber Company said it was terminating the stake sale arrangement with Apollo Tyres Ltd. 

Today, RSS4 grade closed at `.164 a kg at Kottayam, while National Multi Commodity Exchange January 2014 futures closed at `.166.55 a kg, February at `.169.05, March at `.171.92, April at `.174.90 and May at `.176.25 a kg. Tokyo Commodity Exchange, January 2014 futures series closed at ¥279.8 a kg, February at ¥275.9, March at ¥273.8, April at ¥272.9, May at ¥273.7, and the contract for delivery in June 2014 at ¥274.5 a kg. While on Friday RSS3 grade closed at `.157.49 a kg at Bangkok and Malaysian SMR20 closed at `.142.08 a kg.

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New Year to bring cheer

Depreciated currency, combined with economic revival in the US and EU could translate to robust business opportunities for Indian exporters in 2014. Global rubber surplus seen expanding as production outpaces demand. Taking current scenario into consideration, a rebound in Indian natural rubber price in the coming months is highly anticipated.

On Saturday, RSS4 grade closed at `.163 a kg at Kottayam, while National Multi Commodity Exchange January 2014 futures closed at `.165.90 a kg, February at `.168.57 and March at `.171.60 a kg. While on Friday RSS3 grade closed at `.157.49 a kg at Bangkok, while Malaysian SMR20 closed at `.142.08 a kg. Tokyo Commodity Exchange, January 2014 futures series closed at ¥279.8 a kg, February at ¥274.7, March at ¥275.3, April at ¥275.4, May at ¥276.2, and the contract for delivery in June 2014 at ¥277.3 a kg.

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Read lot more in New Year, Rubber4U – 1st January 2014 issue

Import duty hiked

The import duty on natural rubber will be 20% or `.30 a kg, whichever is lower, according to a senior Finance Ministry official. The new duty has come into effect from 20th December 2013. Government has kept the ad valorem rate at the same level, while the specific rate is fixed. The specific rate will come into play when prices of imports fall. As a result RSS4 at Kottayam closed at `.156 a kg on Saturday. For more details visit www.rubber4u.com /Statistic / Notice.

Read lot more in Rubber4U – 1st January 2014 issue

Markets cautious

World markets were cautious on Wednesday as investors waited to see if the Federal Reserve might announce it is trimming its massive stimulus program. The Federal Reserve has announced that it will cut its monthly bond-buying programme by $10bn a month from January. In a statement, finance minister P. Chidambaram said, India is better prepared now to deal with the consequences of a mild tapering by the US Federal Reserve than it was earlier this year. Markets have already factored in the decisions of the US Federal Reserve.

Rubber prices on Tokyo Commodity Exchange fluctuated near a three-month high as the U.S. Federal Reserve starts its two-day meeting and amid speculation that Chinese buyers will boost purchases before Thailand restarts export fees on shipments from January after a four-month exemption. Prices touched ¥287.9 a kg on Monday, the highest intra-day level since 9th September 2013.

On Wednesday, RSS4 grade closed at `.153 a kg at Kottayam. While today on National Multi Commodity Exchange January 2014 futures were trading at `.157.65 a kg, February at `.159.86 and March at `.162.66 a kg, at 13.20 IST. RSS3 grade closed at `.159.65 a kg at Bangkok, while Malaysian SMR20 closed at `.142.87 a kg. Tokyo Commodity Exchange, December futures series closed at ¥285 a kg, January 2014 at ¥279.8, February at ¥278, March at ¥278.1, April at ¥278.7 and the contract for delivery in May 2014 at ¥280.6 a kg.

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Boosting the sentiments

The Reserve Bank of India (RBI) surprised markets by leaving its key lending rate unchanged, despite the fact that retail inflation in November accelerated to 11.24%. The RBI said it would act if food prices don't soften as expected in the coming months and reduce the overall level of inflation. RBI will announce its next monetary policy on 28th January 2014. Acknowledging the industrial downturn, Union minister Sachin Pilot said that the government has taken several measures such as liberalisation of FDI policy and the new Companies Act to uplift the overall business sentiment, boost investment and strengthen the industry.

The Delaware Supreme Court rejects Cooper’s appeal to force Apollo Tyres to complete its proposed acquisition. The Findlay, Ohio-based Cooper Tire and Rubber Co. have only a slim chance to keep Apollo from walking away from the long-pending and controversial deal. Apollo Tyres Ltd., which would become the world’s seventh biggest tyre maker if the deal is completed.

On Wednesday, Tokyo Commodity Exchange, December futures series closed at ¥283 a kg, January 2014 at ¥277.8, February at ¥276, March at ¥276.4, April at ¥278.1 and the contract for delivery in May 2014 at ¥280.1 a kg. While National Multi Commodity Exchange January 2014  futures were trading at `.157.70 a kg, February 2014 at `.160 a kg and March at `.162.75 at 12.45 IST. RSS3 grade closed at `.160.65 a kg at Bangkok, while Malaysian SMR20 closed at `.143.18 a kg.

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Read lot more in Rubber4U – 1st January 2014 issue

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Rubber4U - 15th December 2013 issue

Industrial production declines

India's industrial output contracted for the first time in four months. Industrial production growth fell to 1.8% y-o-y in October 2013 from 2% y-o-y in September. The decline was due to falling production in the country's mining and manufacturing industries. Consumer price index inflation rose to 11.2% y-o-y in November from 10.2% in October. In this scenario, it is expected that Reserve Bank of India may hike the repo rate. Companies complain that rising borrowing costs are making it harder for them to expand.

The Communist Party of India (Marxist) would organise a protest campaign across Kottayam district on 16, 17 & 18th December, against the indifference of Central and State governments towards the problems faced by rubber growers in Kerala.

Tocom’s upward trend and producers to cut output

Between August 2012 and March 2013, Thailand, Indonesia and Malaysia adhered to a pact to cut natural rubber shipments by 300,000 tonnes. Now, Indonesian Rubber Association chairman had sent a letter to Gapkindo members urging them to reduce natural rubber production in 2014, in an effort to shore up prices.

The question raised is that what are the chances of one national organisation getting all those producers to cut production? But this time it is an advance beginning and could be a different story as month’s progresses.

Due to massive purchases from China and optimism that the global economy is rebounding, has pushed up the rubber prices. On Tuesday, Bridgestone bought SIR20 at US$2.32 to $2.33 a kg, without freight for February delivery. Bridgestone may be chasing more Indonesian grade. The market is showing signs of a partial recovery and it is expected that prices to firm up. Today, Tokyo Commodity Exchange rubber futures contract for May delivery hit a high of ¥285.5 a kg and later it closed at ¥284.1 a kg.

Growers are expected not to sell the produce as they usually hold their stocks during December and January if the prices rule low. According to the Rubber Board of India, country's natural rubber production in 2013-14 will be 870,000 tonnes. On the other hand, according to growers production is likely to be around 800,000 tonnes.

Import declines as global prices moves up

Tokyo Commodity Exchange rubber futures contract for May delivery hit a 2-1/2 month peak of on 10^th December 2013 as the yen weakened, although the contract later eased as it came under pressure from declining oil prices and today it closed at ¥279.7 a kg.

According to Rubber Board of India, country's natural rubber imports fell 4.57% on the year in November to 22,872 tonnes, as tyre manufacturers reduced international purchases after prices in local market declined to their lowest level in more than three years.

RSS4 grade closed at `.151 a kg at Kottayam, while National Multi Commodity Exchange December futures were trading at `.152.25 a kg, January 2014 at `.154.74 and February at `.157.05 a kg at 16.05 IST. RSS3 grade closed at `.157.47 a kg at Bangkok and Malaysian SMR20 closed at `.142.95 a kg. Tokyo Commodity Exchange, December futures series closed at ¥274.9 a kg, January 2014 at ¥273.2, February at ¥273.5, March at ¥274.9, April at ¥277.4 and the contract for delivery in May 2014 at ¥279.7 a kg.

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Ban import or suspend DFI

Rubber Board executive committee members met to discuss issues related to rubber price, demanded a ban on rubber import or if that was not possible then the government should temporarily suspend duty free import. Another suggestion raised in the meeting was to raise the import duty to 25% without imposing any cap on the maximum limit and also suggested that the purchase tax of 5% levied by the Kerala government be reduced. The members also urged the central and state governments to implement a scheme for joint procurement of rubber.

Rubber advance on speculation that improving U.S. economic data may bring forward stimulus cuts and China may step up purchases for its state reserves. On Friday, Tokyo Commodity Exchange, December futures series closed at ¥267.9 a kg, January 2014 at ¥267.8, February at ¥270, March at ¥271, April at ¥273.9 and the contract for delivery in May 2014 at ¥275.8 a kg. While National Multi Commodity Exchange December futures were trading at `.152.84 a kg, January 2014 at `.154.57 a kg and February at `.157 at 12.30 IST. RSS3 grade closed at `.157.53 a kg at Bangkok, while Malaysian SMR20 closed at `.142.35 a kg.

Feeling the pinch

The growers started to feel the pinch, as downward trend in the domestic rubber prices continued due to lack demand and over supply. The growers feels that the prices will slide southward in the coming months. Currently domestic prices are ruling below the international prices. According to the growers another `.5-10 fall from the current level will hit them badly, hence they were demanding for an increase in the import duty on natural rubber.

It is estimated that an upward trend can be expected from mid January 2014.

RSS4 grade closed at `.152 a kg at Kottayam, while National Multi Commodity Exchange December futures closed at `.152.81 a kg, January 2014 at `.154.81, February at `.157.19 and March at `.162.39 a kg. RSS3 grade closed at `.159.14 a kg at Bangkok and Malaysian SMR20 closed at `.145.17 a kg. Tokyo Commodity Exchange, December futures series closed at ¥262 a kg, January 2014 at ¥266, February at ¥268.1, March at ¥269.6, April at ¥272.3 and the contract for delivery in May 2014 at ¥274.5 a kg.

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Apollo’s transaction with SRI

Apollo Tyres Ltd has closed the transaction with Sumitomo Rubber Industries (SRI), where in SRI takes over Apollo Tyres South Africa including the Ladysmith passenger car tyre plant and Dunlop brand rights in 32 countries of Africa for US$ 60 million. Apollo retains the Durban plant which manufactures Truck & Bus radial tyres and Off Highway tyres used in the mining and construction industries. Post this transaction, Apollo Tyres will continue to sell Apollo, Vredestein and Regal branded tyres in Africa. Both companies will also undertake contract manufacturing of their respective brands at each other’s facility to have locally manufactured products available for the market.

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Read lot more in Rubber4U – 15th December 2013 issue

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Rubber4U - 1st December 2013 issue

Rubber still in bearish stage

In a letter sent by Kerala Finance Minister K M Mani to Anand Sharma, the Union Minister for Commerce and Industry, has pointed out that on the request of tyre manufacturers, Union Minister had given permission for the import of natural rubber. Unfortunately the said decision has created a sudden fall in the price of natural rubber and the farmers are extremely worried about the government’s decision.

The country’s first e-SBR unit has been set up by Indian Synthetic Rubber Ltd. (ISRL), a joint venture promoted by Indian Oil, TSRC Corporation, Taiwan, and Marubeni Corporation, Japan, is ready for commissioning in Panipat, Haryana and Union Minister for Petroleum and Natural Gas, M. Veerappa Moily, will commission the `.950 crore project on Friday.

Tyre companies have already built-up their inventory through imports. Lower natural rubber prices would bring down the raw material cost of tyre manufacturers, thereby boosting their profitability. Ceat Ltd, JK Tyre & Industries Ltd, MRF Ltd, Balkrishna Industries Ltd and Apollo Tyres Ltd are likely to benefit from the lower prices.

RSS4 grade closed at `.152 a kg at Kottayam, while National Multi Commodity Exchange December futures closed at `.152.97 a kg, January 2014 at `.154.95, February at `.157.49 and March 2014 at `.160.81 a kg. RSS3 grade closed at `.154.30 a kg at Bangkok and Malaysian SMR20 closed at `.141.85 a kg. While Tokyo Commodity Exchange, December futures series closed at ¥252.3 a kg, January 2014 at ¥251.5, February at ¥252.8, March at ¥254.1, April at ¥255.6 and the contract for delivery in May 2014 at ¥256.9 a kg. Tommorrow most probably market is expected to touch ¥259 tag for May delivery.

Selling pressure due to lack of buyers

Auto industry has been going through one of its worst periods in the last decade. Commercial vehicle growth there is a negative growth of 25% for the second successive year and the passenger car sales is just at the breakeven level as compared to last year. The automotive sector has been under tremendous pressure, with passenger vehicle sales declining 5% during the April-October 2013. US based auto maker Ford Motor is looking to make India its global manufacturing hub for small cars.

GDP had come down from 17% a few years ago to 14.6% at present, while the dream was to make manufacturing account for 25% of GDP by 2025. India's GDP growth rate in the quarter ended September 2013 is likely to be around 4.5%, compared to 4.4% growth registered in April-June quarter of 2013-14. World Bank President Jim Young Kim has said India was expected to have a good third quarter, which is in line with Finance Minister P Chidambaram's observations that the country's economy is now picking up.

Even a Rupee difference makes a substantial cost difference to the ultimate cost management of the product. So, the buyers continuously keep watching the markets both international and domestic and take appropriate decision at that point of time whether domestic rubber purchase is better or international rubber purchase. Absence of buyer from consuming sector and weak closing in the domestic futures market kept spot rubber market under pressure. Selling pressure from dealers and growers were visible, who fear further decline in prices is possible.

RSS4 grade closed at `.154 a kg at Kottayam, while National Multi Commodity Exchange December futures closed at `.153.83 a kg, January 2014 at `.155.70, February at `.158.20 and March 2014 at `.160 a kg. RSS3 grade closed at `.156.49 a kg at Bangkok and Malaysian SMR20 closed at `.144.87 a kg. While Tokyo Commodity Exchange, November futures series closed at ¥250 a kg, December at ¥252.8, January 2014 at ¥254, February at ¥256, March at ¥258.2 and the contract for delivery in April 2014 at ¥260 a kg.

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Read lot more in Rubber4U – 1st December 2013 issue

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Rubber4U - 15th November 2013 issue

Protest march to parliament

Kerala Congress-M Ministers, MPs and MLAs is organising a Parliament March tomorrow against UPA government's import policy on natural rubber. Today, RSS4 grade closed at `.158 a kg at Kottayam, while National Multi Commodity Exchange November futures closed at `.157.17 a kg, December at `.159.26 and January 2014 at `.161.36 a kg.

Govt asked industry to work out details of NRP

The government of India has welcomed suggestion of having a national policy for rubber and is considering formulation of a national policy rubber on the lines of national policies for petroleum, textiles and IT. The development commissioner for rubber in the Ministry of Commerce J S Deepak has asked the industry to work out the details of national rubber policy (NRP).

RSS4 grade closed at `.157 a kg at Kottayam, while National Multi Commodity Exchange November futures closed at `.160.59 a kg, December at `.161.24 and January 2014 at `.163.32 a kg. RSS3 grade closed at `.158.08 a kg at Bangkok and Malaysian SMR20 closed at `.145.45 a kg. While Tokyo Commodity Exchange, November futures series closed at ¥248.5 a kg, December at ¥250.2, January 2014 at ¥251.9, February at ¥254.4, March at ¥256.6 and the contract for delivery in April 2014 at ¥258.6 a kg. On Wednesday most probably market is expected to be in green.

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Read lot more in Rubber4U – 15th November 2013 issue

A positive outlook trend

Apollo Tyre and Cooper Tire & Rubber, deal landed in court last month over charges by the US company that its Indian suitor was delaying concluding the deal transaction. Apollo Tyre was pleased as the Delaware court had rejected contentions by Cooper Tire that the Indian company was in breach of its merger agreement with the US company to close the deal.

With a view to further liberalise the procedure relating to payments for exports/imports, Reserve Bank of India allows third-party payments for export, import transactions. Banks are allowed to receive payments for export of goods/software from a third-party and also permitted to make payments to a third-party for import of goods. Third-party refers to an entity other than the buyer or the seller. However, banks would have to follow certain conditions. Third-party transaction should take place through the banking channel and with a Financial Action Task Force (FATF) compliant country.

Rubber rebounded after Japan’s currency slid on U.S and Chinese data, boosting the appeal of yen-denominated futures. The yen traded near a seven-week low against the dollar. On Monday, Tokyo Commodity Exchange, November futures series closed at ¥247 a kg, December at ¥249.8, January 2014 at ¥251.5, February at ¥254, March at ¥257.4 and the contract for delivery in April 2014 at ¥259.4 a kg. While National Multi Commodity Exchange November futures were trading at `.157.50 a kg, December at `.158.79 and January 2014 at `.161.06 a kg at 12.35 IST. RSS3 grade closed at `.158.56 a kg at Bangkok and Malaysian SMR20 closed at `.144.91 a kg.

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Read lot more in Rubber4U – 15th November 2013 issue

Lots of expectation in waiting

Top executives from Cooper Tire & Rubber Co. and Apollo Tyres Ltd. were testified in three-day trial held in Delaware's Chancery Court on Cooper's motion to force Apollo Tyres Ltd. to carry out its proposed $2.5 billion merger with Cooper Tire & Rubber Co. Apollo has said it is committed to the takeover, but not at the current price. The lack of financial information about the Chinese operation raises accounting questions; hence the Indian company alleged it cannot close the deal until it gets accurate, updated financial information from Cooper.

Natural rubber imports by China increased to 190,000 tonnes in October 2013, compared to 179,921 tonnes in September 2013 and 170,409 tonnes in October 2012. India’s natural rubber imports in October shoot up 81% to 33486 tonnes, while production, consumption and exports dropped 7.3%, 3.57% and 59% respectively on y-o-y. RSS4 grade closed at `.156.50 a kg at Kottayam, while National Multi Commodity Exchange November futures closed at `.155.90 a kg, December at `.157.08 and January 2014 at `.159.08 a kg. RSS3 grade closed at `.156.60 a kg at Bangkok and Malaysian SMR20 closed at `.143.39 a kg. As Japanese currency strengthened, it reduced the appeal of yen denominated contracts. Tokyo Commodity Exchange, November futures series closed at ¥245.3 a kg, December at ¥247.5, January 2014 at ¥250, February at ¥252.6, March at ¥255.2 and the contract for delivery in April 2014 at ¥256.9 a kg.

Read lot more in Rubber4U – 15th November 2013 issue

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Rubber4U - 1st November 2013 issue

Farmers stage hartal

China, the leading global consumer of natural rubber, having imported 2.18 million tonnes of natural rubber in 2012, has bought around 54,000 tonnes of Ribbed Smoked Sheet grade natural rubber on Tuesday for government stockpiles.

Sharp fall in natural rubber prices has been causing serious concern in Kerala, India. Today, normal life was hit in Kottayam due to hartal called by pro-Left farmer’s outfits demanding ban on import of rubber in view of crash in prices. Kottayam and the adjoining areas have a large number of small and medium cultivators. The mobility of the people was seriously affected as private buses and autorickshaws kept off the roads, Shops and business establishments remained closed. The farmers were demanding that either a ban on import of rubber or increase in the import duty to shore up the price of the domestic output.

RSS4 grade closed at `.159.50 a kg at Cochin, while National Multi Commodity Exchange November futures closed at `.161.09 a kg, December at `.162.87 and January 2014 at `.164.73 a kg. RSS3 grade closed at `.155.48 a kg at Bangkok and Malaysian SMR20 closed at `.142.38 a kg. While Tokyo Commodity Exchange, November futures series closed at ¥250.2 a kg, December at ¥253.1, January 2014 at ¥255.9, February at ¥258.9, March at ¥261.8 and the contract for delivery in April 2014 at ¥264.3 a kg. On Thursday most probably market is expected to be in green.

Lending rates to increase

Reserve Bank of India Governor Raghuram Rajan has raised its policy repo rate by 25 basis points to 7.75% for the second time in two months to fight inflation. The move would possibly nudge banks to hike their loan rates. The new policy is focused to contain inflationary expectations, with or without support from fiscal policy.

Expect better days on U-turn

Rubber prices in India have slumped on increasing imports and major consumers keeping away from the local market. Natural rubber growers are concerned over daily fall in natural rubber prices, which has reached `.159 a kg at Kottayam, lowest since 26th April 2013. According to growers there had been a mismatch between the input cost and the price they fetch. Growers, traders and political parties hold the steady increase in natural rubber import by the user industry as main factor for decline in domestic prices.

International prices of rubber have fallen too, in the wake of slowdown in the automobile industry. Since the international prices (RSS3 at `.155.23 a kg) have been ruling lower than the domestic prices, Indian tyre manufacturers prefer imports. Rubber4U estimate that if the import continued at the current level, the domestic natural rubber prices may touch `.155 a kg level, before making a U-turn, as major consumers starts to increase their inventory through local purchase.

On Saturday, RSS4 grade closed at `.159 a kg at Kottayam, showing a negative trend. While today, National Multi Commodity Exchange November futures trading at `.159.15 a kg, December at `.160.50 and January 2014 at `.162.30 a kg at 12.15 IST. RSS3 grade closed at `.155.23 a kg at Bangkok and Malaysian SMR20 closed at `.142.54 a kg. While Tokyo Commodity Exchange, November futures series closed at ¥246.4 a kg, December at ¥248.7, January 2014 at ¥251.4, February at ¥254.7, March at ¥257.5 and the contract for delivery in April 2014 at ¥260 a kg. On Tuesday most probably market is expected to be in green.

Tommorrow, Reserve Bank of India will be taking some measures in its monetary policy review and will have to wait and watch whether it is going to retain CRR and repo rates or hike the rates.

Read lot more in Rubber4U – 1st November 2013 issue

Lots of expectation against low demand

According to industry consultant and analyst LMC Automotive, global auto sales in September rose 4.5% from a year ago. China was the leading nation in September auto sales, at 1.9 million in sales. According to Reserve Bank of India's consumer confidence survey - June 2013, only 12.8% of respondents wanted to purchase a vehicle compared with 15.9% in March 2013 and 19.7% in December 2012. This suggests a steadily worsening consumer sentiment, which could negatively impact sales in coming months. There is a limited scope for banks to reduce interest rates further, considering the recent repo rate revision to 7.50% from 7.25% earlier. According to Montek Singh Ahluwalia, deputy chairman of planning commission, India’s current account deficit could drop to below 3.8% in the current fiscal.

The US government ended its partial shutdown by a last minute deal passed by both the Republican led House of Representatives and Democrat dominated Senate. Oil prices were also supported by wide expectations that the U.S Federal Reserve would delay its tapering of stimulus monetary policy.

According to China's National Bureau of Statistics, country's GDP growth accelerated to 7.8% in the third quarter of the year, up from 7.5% in the second quarter. According to General Administration of Customs, in September 2013, China’s natural rubber import increased 5.9% to 180,000 tonnes compared to the previous month. According to dealers' estimates, inventory of natural and synthetic rubber in China's bonded warehouses in Qingdao slipped to 259,600 tonnes as of 15th October, compared with 271,000 on 29th September.

Rubber prices in India have slumped on increasing imports and major consumers keeping away from the market. On Saturday, RSS4 grade closed at `.161.50 a kg at Kottayam, showing a negative trend. While currently, National Multi Commodity Exchange November futures trading at `.161.35 a kg, December at `.163.30, and January 2014 at `.166.20 a kg, at 12.35 IST. Monday, RSS3 grade closed at `.157.58 a kg at Bangkok, while Malaysian SMR20 closed at `.143.97 a kg. While Tokyo Commodity Exchange, October futures series closed at ¥253.9 a kg, November at ¥255.6, December at ¥257.9, January 2014 at ¥261.1, February at ¥264.7 and the contract for delivery in March 2014 at ¥268.4 a kg. On Tuesday most probably market is expected to be in green.

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Read lot more in Rubber4U – 1st November 2013 issue

Lower interest rates to boost demand

Uncertain global economic conditions, combined with outflow of foreign funds from stock markets, among other factors, saw rupee plunging to nearly 70 against the US dollar. However, in recent weeks, the rupee has recovered and is trading at little over 60 level against the dollar. The government has also initiated various measures to boost the economy. Industrial growth slowed in August after staging a tentative recovery in the previous month, dragged down by continued weakness in the manufacturing and mining sectors, raising fresh worries for the government. Industrial output rose 0.6% in August compared to a 2% expansion in the year earlier month. The manufacturing sector fell 0.1% in August compared to 2.4% expansion in August 2012 while the mining sector contracted 0.2% compared to a decline of 0.3% in the previous year-ago period.

The industrial segment has been hit hard by a combination of factors ranging from stubborn inflation, high interest rates, slowing demand, regulatory and policy delays. India Inc stepped up calls for cutting interest rates to boost demand and jumpstart industrial activity. Increased lending to consumers at lower interest rates will greatly benefit industry by encouraging festival season demand.

On Saturday, RSS4 grade closed at `.165 a kg at Kottayam. While National Multi Commodity Exchange October futures closed at `.164.48 a kg, November at `.166.02, December at `.168.03 January 2014 at `.169.78 and February at `.171.83 a kg. On Friday, RSS3 grade closed at `.157.34 a kg at Bangkok, while Malaysian SMR20 closed at `.146.43 a kg. While Tokyo Commodity Exchange, October futures series closed at ¥251 a kg, November at ¥253, December at ¥255.9, January 2014 at ¥259, February at ¥261.9 and the contract for delivery in March 2014 at ¥264.5 a kg. On Monday market is expected to be in green.

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Read lot more in Rubber4U – 15th October 2013 issue

Steady day expected

Indian rupee bounced back and closes at an almost two month high of 61.39 against the dollar amid sales of the US currency. According to a survey by industry body Ficci, it has lowered the country's economic growth forecast for 2013-14 to 5% from 6% projected in July, indicating tough times ahead. The GDP growth forecast for 2013-14 stands at 5%. The survey further revealed that expectations with regard to performance of the industrial sector have also taken a hit. The Index of Industrial Production (IIP) is expected to grow by 1.7% in 2013-14, which is half the 3.5%t growth that was projected in the previous round of the survey held in July 2013.

On Friday, National Multi Commodity Exchange October futures were trading at `.165.50 a kg, November at `.167, December at `.168.89 and January 2014 at `.170.60 a kg, at 11.05 am IST. While Tokyo Commodity Exchange, October futures series were trading at ¥253 a kg, November at ¥254.3, December at ¥257.4, January 2014 at ¥260.5, February at ¥263.6 and the contract for delivery in March 2014 at ¥266 a kg. at 11.45 JST.

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ARC in progress, Growers seeks curbs, Consumers opposes

The sixth Annual Rubber Conference of the Association of Natural Rubber Producing Countries started at Galadari Hotel in Colombo. More than 119 representatives from eleven countries are participating in the Conference. Sri Lankan Plantation Industries Ministry sources said that the objectives of the conference is to improve productivity, reduce cost of production, promote value added rubber products, and generate additional revenue sources related to the rubber sector, encourage manufacturing economic friendly natural rubber products and enhance the sustainability of the natural rubber industry.

Replacement market will continue to be strong over the next couple of years.  Around 70.72 lakh passenger vehicles and nearly 19 lakh commercial vehicles have been added to the Indian roads during 2010-2012, whose tyres will be due for replacement in the near future.

Due to shortage and low production levels of natural rubber, tyre manufacturers have imported around 135,000 tonnes of rubber so far. Falling rubber prices have created panic among rubber growers who feel that import of rubber has worsened the situation and has urged the Union government to hike import duty and check duty-free imports. While addressing a rubber grower’s dharna before the head office of the Rubber Board at Kottayam, Jose K. Mani, MP, urged the government to ban import of rubber for at least a year to tide over the crisis. But Automotive Tyre Manufacturers Association (ATMA) clarified that the natural rubber being imported now was in fact contracted four to eight weeks ago when production dropped drastically in the country.

All India Rubber Industries Association and ATMA are strongly against this and demanded not to increase the duty and allow duty free import up to 200,000 tonnes during 2013-14. Even at higher prices, rubber was not available in the domestic markets and suggested import was a must for the survival of industries. Any hike in the natural rubber import duty will choke the growth of the industry, which was already passing through a difficult phase due to a slowdown in the auto industry.

Today, RSS4 grade closed at `.166.50 a kg at Kottayam, while RSS3 grade closed at `.156.66 a kg at Bangkok, Malaysian SMR20 closed at `.145.26 a kg.

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Positive trend expected

Around 8500 rubber dealers were on strike against the RSS4 grade price falling to `.172 per kg. Natural rubber price slid further to `.166 per kg, resulting in a price crash of `.6 per kg just in a week. Slowing industrial demand for rubber in the domestic market and rising rubber imports reflect a pro-industry situation. Indian Rubber Dealers' Federation (IRDF) has put up before the commerce ministry that the Centre should gear up for rubber procurement if industrial demand does not pick up in coming days.

In April, the Union commerce minister had given the assurance to ramp up import duty on natural rubber to `.34 from the current `.20 per kg. This needs to be done at the earliest, George Valy, IRDF president.

According to Rubber Board of India, natural rubber imports increased 208.41% to 45,581 tonnes in September 2013 compared to 14779 tonnes recorded in 2012. Natural rubber production eased nearly 5% on year to 78,000 tonnes.

On Monday, RSS4 grade closed at `.165 a kg at Kottayam. While National Multi Commodity Exchange October futures closed at `.168.98 a kg, November at `.169.39, December at `.171.32 January 2014 at `.173.80 and February at `.176 a kg. On Tuesday, RSS3 grade closed at `.157.15 a kg at Bangkok, while Malaysian SMR20 closed at `.145.24 a kg. While Tokyo Commodity Exchange, October futures series were trading at ¥251 a kg, November at ¥253, December at ¥255.4, January 2014 at ¥258.6, February at ¥261.5 and the contract for delivery in March 2014 at ¥264 a kg. at 14.25 JST.

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Uncertainty and volatility expected to continue

Oil prices rose due to lower production from Gulf of Mexico, where a tropical storm forced the companies to shut down several oil rigs. Crude oil prices could further rise next week if the current US shutdown (first government shutdown in 17 years) continues and a weaker dollar usually boosts the prices of dollar denominated commodities. 

India's economic growth rate slipped to a decade low of 5% in 2012-13 and declined to 4.4% in the first quarter (April-June) of the current financial year. The Reserve Bank of India expects the economy to grow by 5 to 5.5% in the current fiscal, pinning its hopes on good farm output and improved exports. The Prime Minister's Economic Advisory Council scaled down its growth forecast for the current fiscal to 5.3% from 6.4% earlier.

India is undergoing a significant period of economic uncertainty and volatility. Monsoon has been good; hopefully, this will translate into an increase in consumption mainly driven by rural demand. According to auto industry estimates, in the run-up to the festive season, the value of discounts, which is already higher than those offered last year, may inch up only marginally from the current levels as there is upside pressure on margins, led by a depreciating rupee and higher fixed costs.

Apollo is aiming to gain a foothold in China and the United States through the pending acquisition, but the deal is being opposed by workers at Cooper's joint venture in China, and has further run into trouble over demands made by labour from the United Steel Workers union.

In the domestic market, National Multi Commodity Exchange October futures closed with a positive note at `.169.37 a kg, November at `.168.97, December at `.170.75 and January 2014 at `.172.54 a kg.

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