Rubber4U

Rubber4U - 1st April 2013 Issue

Euro climbs, so rubber inching upward

In the meeting at Brussels, Bank of Cyprus entered into bailout deal with Eurozone finance ministers, preventing island nation's banking system from collapsing. Cyprus, the country of about 800,000 people has a banking sector eight times larger than its gross domestic product, has been given a bailout amounting to €10 billion by the International Monetary Fund and the European Union.

Under the country's Economic Transformation Programme (ETP), Malaysia plans to introduce a second edition of strategies in the next few months to ensure growth of both the upstream and downstream sectors of the domestic natural rubber industry. The government has initiated two ETP, which aims at increasing current rubber productivity of 1,500 kg/hectare to 2,000 kg/hectare annually by 2020 and ensuring the sustainability of the upstream rubber industry. ETP is an initiative that was launched in 2010 by Malaysia to transform the country into a high income economy by 2020 and the rubber industry is expected to contribute MR52.9 billion to gross national income by 2020.

Today, On the Tokyo Commodity Exchange, April futures series closed at ¥263.5, May at ¥267, June at ¥270.3, July at ¥273.1, August at ¥275.8 and the contract for delivery in September closed at ¥279.2 a kg. In the domestic futures market, the April 2013 series is currently trading at `.166.10 a kg, May at `.170.14, June at `.171.31, and July at `.172 a kg on the National Multi Commodity Exchange. In the local market RSS4 grade rubber closed at `.168 a kg and the price of RSS3 grade closed at `.160.43 per kg at Bangkok. While Malaysian SMR 20, closed at `.148.91 a kg.

NR prices moving upward

Rubber growers are hopeful that the proposed 20% import duty hike on natural rubber is likely to cap cheaper arrival of rubber. Growers were depressed about the persisting negative trend in natural rubber prices even as tyre companies continue with aggressive imports.

According to rubber growers, they are unable to manage rubber production costs. Many plantations have remained untapped due to significant fall in natural rubber prices followed by severe labour shortage and higher wages. The growers want the government to take necessary steps to reduce the burden on farmers by hiking import duty, so as to cap cheaper arrival of imports. The proposed new import duty formula on natural rubber will be 20% of the domestic price until the price reaches `.171 a kg, at which point the duty will be capped at `.34.

With the onset of lean season, tyre industry has started feeling the pinch of tight availability of rubber. In a letter to the Rubber Board chairperson, Automotive Tyre Manufacturers Association has urged the Board to urgently intervene to resolve supply crunch in domestic natural rubber market. The limited quantities which are available with the dealers are not being supplemented by new arrivals and what is adding to the supply crunch situation is the fact that domestic prices have started rising and have once again overshot the international prices. The price trend is on the rise and growers are holding back the commodity in the hope of fetching higher prices.

Today, On the Tokyo Commodity Exchange, March futures series closed at ¥265.4 a kg, April at ¥268.9, May at ¥273.5, June at ¥275.6, July at ¥278.9 and the contract for delivery in August closed at ¥281.7 a kg. In the domestic futures market, the April 2013 series is currently trading at `.167.25 a kg, May at `.170.20, June at `.171.94, and July at `.172.68 a kg on the National Multi Commodity Exchange. In the local market RSS4 grade rubber closed with a positive note at `.164.50 a kg and the price of RSS3 grade closed at `.161.77 per kg at Bangkok. While Malaysian SMR 20, closed at `.151.06 a kg.

Read lot more in Rubber4U – 1st April 2013 issue

Tommorrow interest rate cut

Lower interest rates will create economic growth. The monetary policy review of the Reserve Bank of India is scheduled for tomorrow. An interest rate cut, at a time when demand was not showing any signs of revival, would boost sentiments, especially for interest-rate sensitives like the car and real estate sectors. Once the RBI cuts the repo rate, the banks will also pass on the cut to their borrowers. At lower interest rates, people will borrow more and will buy more homes, cars, two-wheelers, consumer durables etc. Lower interest rates will improve car sales and in turn the rubber industry. All this borrowing and spending will revive growth and the economy will grow at higher rate.

Today, the contract for delivery in August closed at ¥270.9 a kg on the Tokyo Commodity Exchange and tomorrow it is expected to touch a high of ¥277 a kg. RSS4 grade rubber in India closed at `.162.50 a kg and the price of RSS3 grade closed at `.157.22 per kg at Bangkok. While Malaysian SMR 20, closed at `.146.23 a kg. On the Tokyo Commodity Exchange, March futures series closed at ¥256 a kg.

Read lot more in Rubber4U – 1st April 2013 issue

Rubber4U

15th March 2013 issue

IIP & rubber price rises

In January 2013, Index of Industrial Production (IIP), which includes output at factories, mines and utilities, rose 2.4%, compared to the level in the month of January 2012. The cumulative growth for the period April-January 2012-13 over the corresponding period of the previous year stands at 1.0%. All sectors have shown a marked improvement when compared to the December numbers. Manufacturing growth improved to 2.7% as against -0.7% and consumer goods growth too improved to 2.8% while it was -4.2% in December 2012. In January, Rubber and plastics products sector growth was -4.3 and cumulative growth for the period April-January 2012-13 over the corresponding period of the previous year stands at 1.3%. Cable, Rubber Insulated grew 140.1% in the category of items showing high positive growth during January 2013 over the same month in previous year.

Natural rubber prices were seen rising to its highest since early January, triggered by anticipation of a rise in import duty. A rebound witnessed in the overseas market and lean production season in the major rubber growing areas bolstered the prices. TOCOM rubber futures jumped to a two week high boosted by upbeat economic data from US and on weaker yen.

Read lot more in Rubber4U – 15th March 2013 issue

Car sales down and India to grow at 6%!

According to World Bank, Indian economy will soon get back to high growth path of 6% next year and hope for even more increase in future. While talking to the reporters after meeting Finance Minister P Chidambaram, World Bank President Jim Yong Kim said although the economic growth has been somewhat disappointing at 5%, but the situation would improve as the global market scenario improves. Indian economy is subject to global slowdown, as export market starts doing better, we think India will do better as well.

In February, car sales in India slumped 25.7% due sluggish economic growth. It is the biggest fall in more than 12 years. According to Society of Indian Automobile Manufacturers (SIAM), in February, automobile manufacturers sold 158,513 cars. Sales of motorcycles fell 4.5% in February to 800,185 vehicles and Truck & bus sales were down 11.1% at 68,388. Car sales were down by 4.6% during the period April-February 2013. There is no improvement in the market sentiment; people have more or less stopped discretionary purchases.

Read lot more in Rubber4U – 15th March 2013 issue

Future outlook

Future days will be complex, volatile and uncertain, but it will also provide many new opportunities for small businesses and their customers. Small businesses will get more specialised. Customers will increasingly seek customised products and services. The rise of innovations, flexible workforce and lower-cost manufacturing options will make it easier for small businesses. In response to growing niche market opportunities, lower equipment costs and better technology, it will be easier than ever to launch a business without a big investment. Collaborative partnerships with big companies will increase, as small companies bring to the table innovative practices, market agility and intimate customer knowledge. Big firms will offer small businesses, marketing and distribution power so that they can take their innovations to broader markets.

Is there any possibility, considering the current scenario?

Centre has promised Kerala that it will peg import duty on rubber at 20% in view of the states concern over crash in prices of the domestic produce. The current rate of import duty on rubber is `.20 a kg or 20%, whichever is lower. This was fixed when the domestic rubber prices were soaring. The natural rubber growers are now hit by crash in price with the industrial users importing huge quantities from abroad. This scenario could be overcome to an extent by enhancing the import duty, said Kerala Chief Minister Oommen Chandy.

The natural rubber prices in the local market have fallen to `.157 per kg, (as on 28.02.2013) nearly 17% since 29th February 2012, when price of RSS4 grade was at `.188.50 per kg, due to slowdown in economy and also on sluggish demand. Union Commerce Ministry had already forwarded this proposal to Finance Ministry for clearance.   

Today, the contract for delivery in August advanced as much as 2.4% to ¥298.9 a kg and closed at ¥298.5 a kg on the Tokyo Commodity Exchange and it is expected to trade above ¥300 a kg on Monday. RSS4 grade rubber in India closed with a positive note at `.160.50 a kg and the price of RSS3 grade closed at `.166.02 per kg at Bangkok. While Malaysian SMR 20, closed at `.157.87 a kg. On the Tokyo Commodity Exchange, March futures series closed at ¥279.9 per kg.

Read lot more in Rubber4U – 15th March 2013 issue

Rubber prices moves up

Economic data are driving commodity prices higher. Rubber futures gained as oil and equity markets rallied on improving U.S. service industries data. China maintained its economic growth target at 7.5% for 2013 and set a lower inflation goal of 3.5%. China’s growth target for this year is not that high and unlikely to boost consumption in a significant way.

Today, the contract for delivery in August advanced as much as 1.7% to ¥292.5 a kg and closed at ¥289.1 a kg on the Tokyo Commodity Exchange and it is expected to trade above ¥293 a kg on Thursday.

RSS4 grade rubber in India closed at `.159 a kg and the price of RSS3 grade closed at `.164.17 per kg at Bangkok. While Malaysian SMR 20, closed at `.157.02 a kg. On the Tokyo Commodity Exchange, March futures series closed at ¥274.3 per kg.

Read lot more in Rubber4U – 15th March 2013 issue

Will the government increase import duty?

The natural rubber prices in the domestic market have fallen nearly 20% since 2nd January 2012, when price of RSS4 grade was at `.195.50 per kg, due to slowdown in economy and also on sluggish demand, it is currently trading at `.157 per kg. The current import duty is `.20 per kg, or 20%, whichever is lower.

Rubber growers from Kerala, accounting for about 90% of the rubber produced in India, have asked the government to increase the import duty to protect the growers interests. Now, there is a possibility that government could increase import duties on natural rubber in order to support falling natural rubber prices. 

Commerce and Industry Minister Anand Sharma said there is a need to review the existing duty structure on import of natural rubber. We have sent our recommendations to the Department of Revenue and now it is the job of the Finance Ministry to take a final view on the issue.

Will the US spending cuts hit India?

The spending cuts in the US have raised uncertainty about the chances of an improvement in India's economic growth. The International Monetary Fund has warned that Washington's planned $85 billion in spending cuts could lead to a lowering of its growth forecast for the US and the global economy. As India's total exports has increased from 11.3% last fiscal to 13% this year, it's exports could take a hit as the expected 750,000 job cuts in the world's largest economy will affect people's purchasing power. But at the moment, it is difficult to say how big an impact the spending and job cuts will have on India.

The Indian auto market is facing tough time at the moment with the ever increasing prices of conventional fuels, high auto finance interest rates and low demand. The auto industry was expecting growth friendly budget, but got disappointed.

For more details on Union Budget 2013-14, log on to www.rubber4u.com / Statistic/Notices

6.5% growth achievable

Commenting on the Union Budget 2013-14, Planning Commission Deputy Chairman Montek Singh Ahluwalia said the biggest challenge right now is huge micro imbalance, very large fiscal deficit which is mirrored in balance of payment by large current account deficit. Now we want to get that in balance, not get the risk of running out of foreign inflows, is important to reduce the fiscal deficit. The fiscal deficit target of 4.8% of the GDP next fiscal was achievable. Registering 6.5% economic growth would be achievable in the backdrop that India's last decade long term average GDP growth of 7.4%.

Commenting on inflation and the outlook for economic growth, Reserve Bank of India Governor Duvvuri Subbarao said inflation is still high, the balance of payments is under stress and decline in investment is a worry because today’s investment is tomorrow’s production capacity. The country can only achieve growth by not just implementing economic reforms but governance reforms in all sectors of the economy.

The rupee fell by a whopping 53 paise to close at nearly two-month low of 54.89 against the US dollar and on Monday it is expected to touch 55 against the dollar.

Petrol price hiked

A rise in international oil prices and depreciation in rupee has forced a hike of `.1.40 per litre increase in price of petrol with effect from midnight tonight. The hike is excluding local sales tax or VAT and the actual increase in rate for consumers will be higher after including the tax incidence. The previous petrol price hike was `.1.50 a litre excluding VAT on 16th February.

The government had hiked the petrol prices before presenting the budget and did so again immediately after it. The people of the country are already reeling under the price rise and the hike in petrol prices will further hit them.

For more details on Union Budget 2013-14, log on to www.rubber4u.com / Statistic/Notices