Rubber4U

1st February 2013 Issue

Outlook currently seems good

There is a ray of hope in the world economy. Economists are of the view that there are scattered sign of improvement the world over. Certainly, there are still big risks out there. But the good news is simply that things are a lot less bad than they had been in the past.

According to Rubber Trade Association of Japan, crude rubber inventories in the Japanese ports fell by 202 tonnes to 6934 tonnes. According to Vietnam’s General Statistics Office, the nation shipped 117,000 tonnes of rubber in December2012, up 11% from previous assessment of 105,000 tonnes.

Rubber inventories in the warehouses monitored by SHFE fell 3.3% to 98007 tonnes in the previous week. According to reports, the decline is largely owing to storage regulations that forced some merchants to withdraw stocks.  According to IRSG, Production is set to outpace consumption by 179,000 metric tonnes this year and 153,000 tonnes in 2014.

On Wednesday, the weakening yen pushed up Tokyo rubber prices. Rubber for delivery in July advanced to ¥302.9 a kg on the Tokyo Commodity Exchange. In the domestic futures market, the February 2013 series closed at `.155.77, March at `.157.89, April at `.161, May at `.164.35 and June at `.167.99 a kg on the National Multi Commodity Exchange. RSS4 grade rubber closed at `.158 a kg at Kottayam.

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. On 5^th December Rubber4U has forecasted on this site about decrease in import of natural rubber and also on 18^th November 2012 that natural rubber price may not cross Rs.164/- per kg mark in short term, but one expect a move over this mark from February 2^nd week. On Thursday one expect Tocom to cross ¥318 a kg mark for July delivery.

Rubber gains on economic recovery symptoms

Investor confidence in global economic recovery increased, leading to purchases of rubber, after data added to signs of a US economic recovery. On Wednesday, Tokyo Commodity Exchange, rubber advanced to the highest level of ¥316.5 a kg on speculation that prices of competing synthetic products will increase due to increase in oil prices and currently it is trading at ¥315.8 a kg (at 14.15 JST). The contract for delivery in July gained as much as to ¥316.5 a kg, the highest level since 21st January.

Today, RSS3 grade closed at `.174.64 per kg at Bangkok, while Malaysian SMR 20, which Indian tyre makers prefer to import, closed with a positive note at `.164.38 a kg. While RSS4 grade rubber in India closed with a negative note at `.158 a kg on Tuesday.

Lots of expectation

The world's second largest economy - China is steadily recovering from a near two-year cool-down. The economy grew 7.8% last year, its slowest annual pace of expansion in 13 years. Now China's economic growth forecast for 2013 has been lifted to 8.4% from 8.2%, with faster expansion seen in the first half of the year. The growth in China's factory sector accelerated to a two-year high in January, as manufacturers received more local and foreign orders. The Chinese Academy of Social Sciences predicts growth will ease slightly in the third quarter before picking up again in the October-December period.

The Reserve Bank of India (RBI) is widely expected to make a modest cut in interest rates to support an economy set for its slowest growth in a decade. According to RBI, high inflation and the widening current account deficit were the big constraints limiting the scope for monetary actions like an interest rate cut to boost growth. After growing at an alarming pace, India's headline inflation rose an annual 7.18% in December 2012, the slowest since December 2009. Despite constant calls for an interest rate cut from the industry to boost production, which contracted by 0.1% in November, the central bank has time and again stated that controlling inflation remains its key objective.

India's fiscal deficit touched `.413,000 crore in April-November. The government expects a budget deficit in the current fiscal year of 5.3% of GDP.

RSS4 grade rubber in India declined and closed at `.159.50 a kg and the price of RSS3 grade closed at `.176.38 per kg at Bangkok. On the Tokyo Commodity Exchange, February futures series currently trades at ¥313.3 per kg and is expected to cross ¥315 per kg mark on Tuesday.

Rubber heads up on weak yen

RSS4 weakened in the Indian markets on Saturday weighed down by sluggish demand. In the physical market, the grade was quoted lower around `.161 a kg. In NMCE, the benchmark February rubber futures trading in narrow ranges and closed at `.161.89 a kg and May closed at `.171.01 a kg. Lack of buying interest despite higher international natural rubber prices and rising stockpiles probably pressurised the Indian natural rubber prices. Fall in natural rubber imports is likely cushion further fall in natural rubber prices.

China’s GDP rose to 7.9% in the Q4 of 2012 on a y-o-y basis following seven straight quarters of slowdown. Industrial production recorded a growth of 10.3% in December. Crude for February delivery rose to $95.25 on 18th January, the highest close since 17th September 2012. Oil is used to make synthetic rubber, while a weaker Japanese currency (Yen touched 90.13 per dollar) boosts the appeal of yen-based contracts. Rubber rose for a second day, heading for the longest weekly winning streak since November 2007, as the yen weakened against the dollar and oil gained, boosting the appeal for the commodity. Rubber for delivery in June advanced to ¥316.5 a kg on the Tokyo Commodity Exchange and on 21st January, the price may touch ¥319.5 a kg.

Read lot more in Rubber4U – 1st February 2013 issue

Futures dips on demand worries

Rubber futures fell as a shaky global economic outlook and a pause in the yen's recent selloff prompted profit taking after prices hitting ¥321 yen last week, its highest since early April. The key Tokyo Commodity Exchange rubber contract for June delivery may touch a low of ¥301 per kg on 16th January 2013. 

The World Bank sharply cut its 2013 outlook for world economic growth to 2.4% from its last forecast in June of 3%, blaming an unexpectedly sluggish recovery in developed countries for holding back the global economy. Oil prices dipped in heavy trading on Tuesday as German economic data and concerns about the brewing fight over the U.S. debt ceiling stoked concerns about fuel demand. The yen rose to as much as 88.28 from a 2-1/2 year low of 89.67 set on Monday after Japan's Economics Minister warned that excessive yen weakness could boost import prices, hurting people's livelihood.

India's natural rubber production during December 2012 rose 3% to 110,000 tonnes. Were as it’s natural rubber imports fell 35.63% to 13,611 tonnes, as rubber goods manufacturers preferred domestic natural rubber, as it is currently trading below the international price.

Read lot more in Rubber4U – 1st February 2013 issue

Rubber4U

Rubber4U - 15th January 2013 Issue

IIP declines, but market steady

According to the government of India data, index of industrial production (IIP) declined 0.1% in November 2012, compared to November 2011, due to deceleration in production in manufacturing, mining and electricity generation.

India has decided to opt out of negotiations for agreements between select WTO member countries for liberalizing foreign direct investment and visa regimes in service sectors and for lowering import duty on 357 information technology products and 54 environmental goods, saying the talks were against its interests.

              

What the US and European Union are trying to do is cherry-picking without addressing the core concerns of developing countries. Early harvest was pushed by developed countries as they were unwilling to open up farm trade, a domestic hot potato, even as countries such as India were not very keen on the plan. Although India is no longer part of the negotiating group, it retains its ‘observer status’ to keep the option of rejoining talks later. India's view is that the issue needs to discussed at the WTO and instead of following a product-specific list approach, a better strategy would be to have project-driven agenda that will benefit the developing countries.

Asian rubber settled mixed as firm fundamentals support, but a pullback in the broader market after strong gains last week weighed on some rubber bourses.

Tocom rubber is vulnerable to currency moves, benchmark June natural rubber futures on the Tokyo Commodity Exchange settled at ¥312.3 a kg as major producing regions experience heavy rain, keeping supply tight.

The world’s largest importer China was in the market bidding ahead of the Lunar New Year break in February, its bids were often too low for trades. Natural rubber prices may hit US$4 per kg in 1^st quarter of 2013 due to firm fundamentals, due to seasonal factors and an improved global macroeconomic outlook.

RSS3 grade closed at `.185.06 per kg at Bangkok, while Malaysian SMR 20, which Indian tyre makers prefer to import, closed at `.169.25 a kg. On the Tokyo Commodity Exchange, January futures series in night session of trade date 15^th January closed at ¥298 per kg, February at ¥299.3, May at ¥308.1 per kg and June 2013 at ¥311.5 per kg.

                                                         

Read lot more in Rubber4U – 15th January 2013 issue