Rubber4U

Rubber4U - 1st June 2013 issue

Economic growth at 5%

India registered its worst GDP growth in a decade with the economy registering a growth rate of 5% during 2012-13. The growth rate during January-March 2013 was just 4.8% compared to 5.1% in January-March 2012.

According to Japanese government data, country's industrial production increased by 1.7% in April compared to previous month, rising for the fifth consecutive month.

Due weak world economy and exports the world's second largest economy – China is losing momentum, hence, the International Monetary Fund has cut its growth forecast for China this year to 7.75% from 8%.

Today, the price of RSS3 closed at `.171.26 at Bangkok, while Malaysian SMR20 closed at `.132.90 a kg. On the Tokyo Commodity Exchange, June futures series closed at ¥248, July at ¥249.9, August at ¥252.6, September at ¥254.5, October at ¥256.2 and the contract for delivery in November closed at ¥258.4 a kg. While on the National Multi Commodity Exchange June futures were trading at `.166.13, July at `.165.05, August at `.163.01, September at `.161.50 and October at `.161.32 a kg., at 1.30 pm IST.

Hike in petrol price

As per the practice of revising rates every fortnight, petrol price revision is due and if oil ministry approves, the increased prices, most probably around `.1 a litre, will come into effect from 1st June, as the rupee hit a 10 month low making oil imports costlier. International oil prices have softened, the rupee has depreciated against the US currency to `. 56.38/39 per dollar.

This will be the first price hike in three months, which was last increased on 1st March 2013. Since then, petrol prices have been cut four times on falling global oil prices.

India to continue the chairmanship

International Rubber Study Group (IRSG) is the only forum where natural rubber and synthetic rubber producers and consumers come together and discuss issues of common interest. India has retained the Chairmanship of the International Rubber Study Group, based in Singapore. India has been chairing the IRSG since 1st July 2011 and will continue as the Chairman for two more years. The decision was made unanimously in the meeting of the Heads of Delegations (HOD) of the Group held in Singapore. Ms. Sheela Thomas, Chairperson - Rubber Board of India, would officiate as the Chairman of IRSG representing India. European Union was re-elected as the Vice-Chairman of IRSG for the next two years.

U.S data raises growth outlook

Rubber is poised for gain as data showed U.S. consumer confidence climbed in May to 76.2, the strongest since February 2008. The yen weakened to 102.53 per dollar and boosting the appeal of futures in yen. The contract for delivery in November on the Tokyo Commodity Exchange climbed to as high as ¥274.8 a kg. The data added to optimism that the U.S economy is improving and the yen’s weakening trend against the dollar will remain intact.

Today, RSS4 grade closed at `.169.50 a kg at Kottayam. The price of Malaysian SMR20 closed at `.135.34 a kg. While on the National Multi Commodity Exchange June futures were trading at `.166, July at `.164.51, August at `.163.25, September at `.162.73 and October at `.163.50 a kg. On the Tokyo Commodity Exchange, June futures series closed in negative at ¥257, July at ¥257.7, August at ¥259.8, September at ¥262.4, October at ¥265 and the contract for delivery in November closed at ¥267.4 a kg. Most probably tomorrow the market will be in red in the initial stage.

Bearish trend to continue

Oil prices eased in Asia as poor housing and employment data from the United States sparked concerns of weaker crude demand in the world's biggest economy.

The economy has slowed down, business has slowed down. But this year, I expect the economy to grow at least by 1% more than last year. Next year, I expect it to grow another 1% more than the current year. We should soon reach our potential growth rate of 8%, said Finance Minister P Chidambaram.

The final FY13 GDP numbers are expected early next week and the GDP is widely expected to be around 5%. The Economic Survey pegged GDP growth between 6.1 and 6.7% for FY14. In its annual monetary policy announcement on 3rd May, the Reserve Bank had estimated growth for the fiscal at 5.7%.

The rupee touching nearly 9 month low against the dollar and Reserve Bank of India (RBI) has decided to relax norms for exporters. RBI had imposed a host of restrictions on both banks as well as corporates in December 2011 and subsequently in 2012 that were considered necessary for curbing their speculative behaviour. As the situation improved, many of these restrictions have been either relaxed partially or removed.

Thailand will not extend restrictions on exporting natural rubber when the measure expires on 31st May; curbs had little impact on prices. Most probably on Monday, TOCOM will be trading in negative.

Market turns bearish

On Wednesday sharp gains in the Bangkok spot market kept the Indian traders active and spot rubber was bullish following a better closing on the National Multi Commodity Exchange. Yesterday, the RSS4 grade closed at `.171 at Kottayam and RSS3 closed at `.169.10 at Bangkok. While June futures closed at `.172.28, July at `.171.40, August at `.169.27, September at `.165.99 and October at `.163.52 a kg on the NMCE. The Malaysian rubber market also finished higher, extending its gains for the third consecutive day, boosted by positive sentiment.

The crackdown on companies which are heavily involved in buying and selling imported goods, are struggling to get trade loans as banks scrutinise their activities and hold back credit following Beijing's orders to rein in currency speculation. Chinese Banks have stopped issuing letters-of-credit with long maturity dates, which in turn will take the commodity market to the bearish trend. Meanwhile, supply from Thailand is expected to increase in the coming months on seasonal factors.

Today, on the Tokyo Commodity Exchange, May futures series closed in negative at ¥264.1, June at ¥266.5, July at ¥268.1, August at ¥271.2, September at ¥272.9 and the contract for delivery in October closed at ¥275 a kg. While on the National Multi Commodity Exchange June futures were trading at `.169.50, July at `.168.39, August at `.167.17, September at `.164 and October at `.163.97 a kg at 1 pm IST.

Wednesday may see ¥300 a kg mark

Positive cues from global markets provided support to the benchmarks; prices moved higher, investor confidence was boosted with US leading indicators and consumer sentiment moving higher than expectations.

The yen traded at 102.63 per dollar after touching 103.31 on 17th May, the weakest level since October 2008. Japan’s currency came under pressure after the U.S data, adding to optimism that the recovery of the world’s largest economy may be picking up. The contract for delivery in October on the Tokyo Commodity Exchange gained to ¥292.5 a kg and finally settled at ¥289.5 a kg, the highest level at the close since 13th May. It is estimated that by Wednesday, the October delivery may touch ¥300 a kg mark. 

According to the Rubber Research Institute of Thailand, rubber free-on-board rose to 89.85 baht a kg. Trying to prevent fluctuation in the price of natural rubber, Thailand's Agriculture and Cooperatives Ministry has set a price of 110 baht per kg. According to Thai Agriculture and Agricultural Cooperatives agency, the nation’s biggest producer and exporter, is targeting a price of 110 baht a kg for 2013. The daily momentum has once again turned positive, indicating that the index is likely to find strong support in case of any dips.

According to Rubber Board of India, natural rubber imports in April fell 38% on year to 10,871 tonnes as user industry trimmed overseas purchases due to a sharp drop in domestic prices. Consumption rose 3.8% to 82000 tonnes, while production increased by 0.6% to 53000 tonnes on y-o-y basis.

Rubber once again to make uptrend

The recent uptrend in the natural rubber futures can be attributed to the depreciation of the Japanese Yen, which began when the Japanese government announced Quantitative Easing measures in April.

Global crude oil prices are trading lower on the back of strong Dollar. Rubber fell after oil dropped, increasing speculation that prices may weaken for synthetic rubber. Crude for June delivery traded at $94.34 a barrel in electronic trading on the New York Mercantile Exchange.

Today, rubber for delivery in October touched a low of ¥277.3 a kg and closed at ¥287.9 a kg on Tokyo Commodity Exchange. The price of RSS3 grade closed at `.164.40 per kg at Bangkok, while Malaysian SMR20 closed at `.134.79 a kg. Currently there are no buyers as they anticipate a further downtrend to occur in prices. In the domestic futures market, at 1.00 pm IST, the June 2013 series were trading in negative at `.169.48 a kg, July at `.169.20, and August at `.167.85 a kg, on the National Multi Commodity Exchange. At Kottayam, RSS4 grade rubber may close at  its previous level.

Read lot more in Rubber4U – 1st June 2013 issue

Rubber4U

Rubber4U - 15th May 2013 issue

Inflation eases

Inflation slowed for a third straight month in April to 4.89%. The wholesale price index, the country's main inflation measure, rose an annual 5.96% in March. February was revised to 7.28% from 6.84%, the government data showed.

Read lot more in Rubber4U – 15th May 2013 issue

IIP accelerates and rubber demand expected to expand 5%

The growth in Index of Industrial Production (IIP) witnessed a pick-up in March and grew by 2.5% y-o-y as compared to 0.6% y-o-y growth registered in February. During March, manufacturing grew at a robust 3.5%, while electricity growth moderated to 3.2% and mining production contracted 2.9%. In terms of industries, 10 of the 22 industry groups in the manufacturing sector showed positive growth in March as compared with the corresponding month of the previous year.

The recovery in global economic growth is expected to be slower than earlier expectations. Rubber demand is forecast to expand 5% to 1.02 million tonnes this year, while production may climb 5.2% to 960,000 tonnes. The shortfall will be met from stockpiles and duty-free imports by some users, who are allowed to import some quantity without any import tax. The biggest slump in car sales since 2001 last year boosted local rubber stockpiles 13% to 2,66,000 tonnes, and will make up for a domestic shortfall in supplies. Natural rubber imports are poised to drop for the first time in five years from a record as declining car sales crimp demand for natural rubber. Bearish sentiments are reported to weigh on the natural rubber market in the near future, said Sheela Thomas, chairperson of Rubber Board of India.

Car sales jumped, so the rubber prices

Car sales in UK jumped by almost 15% in April 2013, compared to April 2012 and 9% higher in the first four months of 2013, which is an encouraging indication for the UK economy. The health of the UK car market stands in sharp contrast to Europe, where sales slumped by more than 10% in March. Despite the buoyant start to the year, car market faces difficult conditions in the coming months as their purchasing power is squeezed by higher inflation and muted wage growth. Companies are also under pressure to contain costs and weak business confidence.

The yen weakened to 99.12 per dollar, nearing to a four year low of 99.95. Rubber inventory in Qingdao, China’s main hub for the commodity rose to a record high, as imports gained while demand remained tepid amid slowing economic growth. China may step up rubber purchases on hopes for demand recovery later this year, hence, may increase imports of the natural rubber to take advantage of low international prices.

Today, RSS4 grade in the domestic spot market will trade with positive note and may close around `.168 a kg. The price of RSS3 grade closed at `.163.54 per kg at Bangkok, while Malaysian SMR 20 closed in red at `.138.32 a kg. On the Tokyo Commodity Exchange, May futures series closed at ¥263.5, June at ¥266.2, July at ¥270, August at ¥272, September at ¥274.6 and the contract for delivery in October at ¥276.6 a kg.

Indication of upward trend

Rubber inventories in the warehouses monitored by SHFE rose to 122137 tonnes. Thailand, the world's biggest rubber producer and exporter, is considering discontinuing measures curbing rubber exports as they have failed to lift prices. Thailand government has no immediate plan to sell rubber from stockpiles as it will push prices of the commodity lower.

According to the Indian Union Commerce and Industry Minister Anand Sharma, import duty on natural rubber was to be hiked soon though the Minister of State for Finance in a written reply in Lok Sabha ruled out a hike for now.

The natural rubber market in India is strengthening. On Tuesday, in the domestic spot market, the RSS4 grade will be trading with positive note and may close around `.167.50 a kg. The price of RSS3 grade closed at `.162.45 per kg at Bangkok, while Malaysian SMR 20 closed at `.139.68 a kg. The contract for delivery in October may close with a positive note around ¥272 a kg on the Tokyo Commodity Exchange.

Read lot more in Rubber4U – 15th May 2013 issue

Rubber4U

1st May 2013 issue