Rubber4U

Rubber4U - 1st July 2013

Petrol price hiked

All is well at the moment

European Commission President Jose Manuel Barroso announced a political deal on the European Union's hotly contested 2014-2020 trillion-euro budget. Now it has to be seen that these monies are channelled into effective programmes so people across the EU can find jobs.

According to Reserve Bank of India data, India’s current account deficit stood at a historic high of 4.8% of GDP in 2012-13, amid signs that the gap could remain at worrisome levels, despite having halved to 3.6% of GDP during January to March, from the previous quarter’s 6.7%.

Global credit rating agency Moody's said that India's fuel subsidies may reach a whopping `.1.3 lakh crore in 2013-14, surpassing their earlier estimate of `.1 lakh crore from a record high of `.1.6 lakh crore in 2012-13. Indian rupee has depreciated by 11.8% since the beginning of current fiscal year and reached an all-time low of 60.73 against the US dollar on 26th June 2013. If the rupee continues to depreciate and averages 62 against the dollar and crude prices increase to average $108 per barrel for 2013-2014, subsidies could return to Rs. 1.6 lakh crore.

Currently, rubber is heading towards north and can expect a positive outlook tomorrow.

Is rubber loosing the ground?

Crude oil prices are struggling to gain significant ground but have managed to pick up in the initial stage of trading as U.S data stoked optimism that recovery in the world’s largest economy is picking up, boosting the dollar and raising the appeal of futures denominated in yen. The contract for delivery in December on the Tokyo Commodity Exchange climbed to as high as ¥235 a kg and closed at ¥227.2 a kg, after touching a low of ¥226.5 a kg. It seems that rubber is heading towards a price tag of ¥200 a kg, but tommorrow the market will be in green.

The Malaysian rubber market finished lower, due to lack of buying interest from major consumers. China consuming 3.85 million tonnes last year, representing 34% of global demand, had stopped importing natural rubber and was consuming locally produced rubber to reduce its stockpile. 

In the domestic market, supply of natural rubber is extremely tight, growers are not releasing stocks as they are expecting higher price and hence it is holding the fort at `.175.50 a kg.

Rubber losing all the initial gains

The Federal Reserve's signal that the era of cheap central bank money was coming to an end. Plans by the U.S central bank to scale back its money printing combined with fears that China's policy may be tightening to lift the dollar has raised fears of prolonged market shakeout, while commodities extended last week's losses.

Rubber declined, heading for a fifth monthly loss, amid concern that demand may weaken from the world’s largest consumer. Rubber grade RSS4 trading flat in the local market and in the spot market on NMCE, the grade was little changed as investors await fresh triggers for further directional moves. TOCOM rubber futures erased all the initial gains while SHFE and AFET rubber futures dropped. In May, natural rubber production in India rose 1.7% to 59000 tonnes, while consumption dropped 3.1% to 83000 tonnes. Imports slumped 17% to 17334 tonnes.

The Indian rupee hit an all-time low against the US dollar and it is going to impact the industries and the common man very badly. Crude oil accounts for a major share of India's import bill, which will become more costly, due to falling rupee. The additional burden of importing crude oil will be transferred to the consumers and in turn transportation charges will increase. Manufacturers would also revise their prices upwards to match their profit margins.

Rubber futures in Tokyo swung between gains and losses as Japan’s currency weakened against the dollar on prospects the Federal Reserve will signal the fate of U.S monetary stimulus. The contract for delivery in November on the Tokyo Commodity Exchange was down at ¥231.6 a kg.  RSS3 grade closed at `.163.89 a kg at Bangkok, while Malaysian SMR20 closed at `.133.18 a kg. Indian RSS4 grade rubber closed at `.175.50 a kg at Kottayam, while on the National Multi Commodity Exchange July futures were trading at `.173.15, August at `.169, September at `.165.19, October at `.162.06 and November at `.166.38 a kg., at 3.30 pm IST.

Oil in New York traded nears a nine-month high after an industry report showed U.S stockpiles dropped. Higher oil prices boost the cost of making synthetic rubber.

Tight domestic supply may increase import

The rupee fell to a new low against the U.S dollar because of U.S Federal Reserve suggestions -will soon taper bond buying. There have been buyers from India recently to buy natural rubber, but bids from Indian buyers are low because the weak rupee.

Supply of natural rubber is extremely tight in the domestic markets as there has been no rubber tapping in Kerala for more than two weeks because of monsoon rains. Consuming sector has been forced to look overseas for supply. Growers are not releasing stocks as they are expecting price rise, due to which there is a possibility that rubber imports by India may rise and according to an estimate by Association of Natural Rubber Producing Countries, India will import 183,000 tonnes this year.

Today, prices of Indian RSS4 grade rubber closed at `.175.50 a kg at Kottayam, while on the National Multi Commodity Exchange July futures were trading at `.172.73, August at `.168.55, September at `.165.52 and October at `.162.50 a kg., at 4.00 pm IST.

Rupee trembles

The domestic unit plunged 130 paise to hit a life-time low of 60 against the US dollar in early trade against the previous close of 58.71 at the Interbank Foreign Exchange market. The currency also continues to face challenges from India’s rising current account deficit. The weakening currencies come at a tricky time for Asian economies, as countries face an uncertain growth outlook compounded by inflationary pressures.

Today, prices of RSS3 closed at `.164.95 a kg at Bangkok, while Malaysian SMR20 closed at `.134.50 a kg. On the Tokyo Commodity Exchange, June futures series closed at ¥229, July at ¥232, August at ¥232.3, September at ¥234.3, October at ¥236.1 and the contract for delivery in November closed at ¥238 a kg, after touching a low of ¥235.2 a kg.

Price stability fund to boost confidence

India’s imports rose about 7% from a year earlier, while exports fell 1.1%, the first annual fall in five months. According to trade ministry official, trade deficit in May widened to $20.1 billion from $17.8 billion a month ago. The Indian central bank left its policy repo rate unchanged at 7.25% and kept the cash reserve ratio steady at 4%, despite some signs of moderating inflation in recent months.

Thailand Ministry of Agriculture and Cooperatives and seven private firms are setting up a Bt210-million rubber price stability fund to buy at least 42 billion tonnes of the agricultural commodity in July. The objective of this fund is to buy rubber via Agriculture Futures Exchange of Thailand (AFET), because the future price of rubber for delivery next January is Bt78 per kg, which is unusually low, compared with the prevailing price of Bt85 per kg. Each of the seven parties will contribute Bt30 million to set up the fund, which should be engaged in 300-400 buying/selling transactions per day, which is adequate to create positive sentiment and boost investors confidence. It is predicted that rubber prices would be adjusted to Bt110 per kg after the launch of the fund in July.

Today, prices of RSS4 grade closed at `.175.50 a kg at Kottayam and RSS3 closed at `.162.94 a kg at Bangkok, while Malaysian SMR20 closed at `.134.91 a kg. On the Tokyo Commodity Exchange, June futures series closed at ¥234.7, July at ¥234, August at ¥234.9, September at ¥235.6, October at ¥237.3 and the contract for delivery in November closed at ¥238.9 a kg, after touching a low of ¥231.3 a kg. While on the National Multi Commodity Exchange July futures were trading at `.174.20, August at `.171.40, September at `.168, October at `.165 and November at `.163.42 a kg., at 4.45 pm IST.

Read lot more in Rubber4U – 1st July 2013 issue

Rubber4U

Rubber4U - 15th June 2013 issue

Inflation eases to 4.7%

The Wholesale Price Index (WPI) based inflation fell to 4.7% in May 2013. A decline in the prices of manufactured items helped bring down inflation. In May 2012 it was 7.55%, while in April 2013 it was at 4.89%.

Finance Minister P Chidambaram says the measures taken by the government since August have been successful in bringing down inflation and the fiscal deficit. He added that more reform measures will come up by the end of June-July to boost investment and growth.

There have been demands for a lower interest rate in the backdrop of declining inflation. Inflation data would be closely watched by the Reserve Bank while formulating its mid-quarter policy which is scheduled on Monday.

India faces its own unique challenges, given consumer inflation remains elevated while a current account deficit that hit a record high of 6.7% in the October-December quarter continues to weigh on the rupee.

The World Bank has forecast a 6.7% growth rate for India by next fiscal as exports and private investment are projected to strengthen and provide a boost to growth.

Today, prices of RSS4 grade closed at `.175 a kg at Kottayam and RSS3 closed at `.162.09 a kg at Bangkok, while Malaysian SMR20 closed at `.134.56 a kg. On the Tokyo Commodity Exchange, June futures series closed at ¥230.2, July at ¥232.7, August at ¥233, September at ¥233.3, October at ¥233.6 and the contract for delivery in November closed at ¥235.3 a kg. While on the National Multi Commodity Exchange June futures were trading at `.175, July at `.171.50, August at `.168.51, September at `.166, October at `.164 and November at `.159.24 a kg., at 4.45 pm IST.

Read lot more in Rubber4U – 15th June 2013 issue

Rubber producers may introduce measures

Rubber producing countries may introduce appropriate measures to counter a further fall in natural rubber prices, according to the International Rubber Consortium. Natural rubber producing countries are monitoring a widening gap between the Thailand rubber export price and futures, which may encourage them to introduce appropriate measures to counter a further fall.

Tokyo Commodity Exchange futures have fallen on concerns over expanding stockpiles and easing demand. The most active contract in Tokyo closed at ¥240.1 a kg. Thailand, Indonesia and Malaysia, haven’t made any joint official announcement on an export restriction after a program to cut shipments by 300,000 tonnes ended in March.

IIP down, Apollo to buy Cooper

Index of industrial production (IIP) slowed down to 2% in April from 3.4% in the previous month. Manufacturing growth remained weak at 2.8% in April and output of top 5 industries grew by 22.3% compared to a year ago, while output of the remaining 17 industries fell by 3.7%. Output of the eight core infra industries, having 38% weight in IIP, decelerated to 2.3% in April from 3.2% in the previous month.

Apollo Tyres Ltd said it would buy U.S based Cooper Tire & Rubber Co., world's 11th biggest tyre company by sales, for about $2.5 billion in a deal that would make it the world's seventh largest tyre maker. Apollo Tyres currently does not operate in the United States. The acquisition of Cooper will give Apollo access to the U.S market for replacement tyres for cars and light and medium trucks.

Measures to protect rupee

From less than `.40 to the dollar in April 2008 the rupee fell to historic low of 58.2 to the dollar on 11th June 2013. Weakness of the rupee is a result of a deterioration of India’s economic performance, especially the deterioration of its balance of payments. When the rupee hit 58 to the dollar, Finance Ministry chose to appear in public to declare there is no need to panic. But it is perhaps the time they themselves panicked and did something in the short run to correct the deterioration of India’s balance of payments.

The Reserve Bank of India took measures to increase the supply of dollars in the market including asking exporters to realise their dollar earnings and get them back into the country within one year to support a plunging rupee.

The apex bank also hastened the process of dollar inflows through online payment channels by increasing the amount that exporters can bring back to $10,000 from $3000. The new norms will be applicable with immediate effect, the RBI said.

These are the first few steps taken by the RBI to send a signal of its intention to protect the rupee through administrative measures.

Rubber moves up, Rupee declines, so the auto

The Indian rupee touches all time low of 58.95 against dollar. The rupee has lost over 2.5% in the last two trading days and nearly 10% in the past six weeks on concerns of scaling down of stimulus packages by the US.

This is a temporary phase. This is simply a correction. Our indication is some of the FIIs are now poised to bring in large funds. In next 3-4 days, we will see a mid-course correction. The rupee would recover as the country’s economic fundamentals are strong and government is taking steps to increase fund flows, Department of Economic Affairs Secretary Arvind Mayaram said while addressing the reporters.

According to the data from Society of Indian Automobile Manufacturers, overall domestic sales during April-May 2013 declined by 0.64% compared to same period of previous year. Sales in passenger vehicles segment declined by 8.56%, commercial vehicles segment registered de-growth of 5.20% during April-May 2013, when compared to same period of 2012. The auto industry produced 1,737,548 vehicles in May 2013 as against 1,811,515 in May 2012, a decline of 4.08%.

Today, prices of RSS4 grade closed at `.174 a kg at Kottayam and RSS3 closed at `.166.01 a kg at Bangkok, while Malaysian SMR20 closed at `.135.56 a kg.

High inventory keeps rubber under pressure

Oil prices rose in the initial stage of trading (at 16.05 IST WTI crude oil were trading in red at US$95.65 per barrel) as moderate growth in new jobs in the United States raised hopes about a pick-up in demand, which points towards a growing economy.

According to China Association of Automobile Manufacturers wholesale deliveries of cars, multipurpose and sport utility vehicles increased 9% to 1.4 million units in May compared to 13% growth in April 2013. Natural rubber imports by China fell to 180000 in May compared to 227320 tonnes imported during April 2013. Rubber inventories in warehouses monitored by the Shanghai Futures Exchange rose 0.1% to 114,324 tonnes last week.

Thailand’s restriction on rubber export ended on 31st May and inventories hovering close to multi-year highs, natural rubber prices are likely to continue to be under pressure for the rest of the second quarter of 2013 before recovering in the second half of 2013. Top three natural rubber producing countries - Thailand, Indonesia and Malaysia, is scheduled to meet in Indonesia during 12 – 14 June, to discuss measures to stabilise natural rubber prices.

Today, prices of RSS4 grade closed at `.173 a kg at Kottayam and RSS3 closed at `.162.30 a kg at Bangkok, while Malaysian SMR20 closed at `.132.84 a kg. On the Tokyo Commodity Exchange, June futures series closed at ¥239.7, July at ¥241.8, August at ¥243.5, September at ¥244.1, October at ¥245.4 and the contract for delivery in November closed at ¥247 a kg. While on the National Multi Commodity Exchange June futures were trading at `.175.25, July at `.171.23, August at `.167.97, September at `.165.01 and October at `.162.37 a kg., at 4.05 pm IST.

Major rubber producing countries to meet to discuss how to prop up prices

International Rubber Study Group announced a Sustainable Natural Rubber Action Plan with the key objective to promote the use of voluntary sustainable natural rubber standards throughout the global rubber economy. TOCOM rubber futures rebounded from the one month lows after expansion in auto sales in the US. However, gloomy economic outlook and surplus market situation seen for the current year is likely to maintain a bearish trend.

The wintering season drawing to a close in northern Indonesia, Malaysia and Thailand, futures of natural rubber in TOCOM was seen trading down as farmers return to tapping, which may increase the supply of natural rubber as the days advance. Rubber for delivery in November touched a low of ¥246.8 a kg and closed at ¥247.7 a kg on the Tokyo Commodity Exchange. The prices of RSS4 grade closed at `.171 a kg at Kottayam and RSS3 closed at `.162.95 a kg at Bangkok, while Malaysian SMR20 closed at `.134.12 a kg. While on the National Multi Commodity Exchange, October futures were trading in negative at `.160.90 a kg., at 4.15 pm IST.

Thailand, Indonesia and Malaysia, will meet next week to discuss measures to stabilise prices. Thailand is expected to propose new export curbs or measures to limit supply as a way of propping up prices and support farmers. The meeting of senior officials from the three countries would be held during 12-14th June in Palembang, Indonesia.

According to the Association of Natural Rubber Producing Countries report, Indonesian natural rubber production is expected to gain 5% to 3.18 million tonnes and Malaysia’s output may increase 6.2% to 980,000 tonnes.

Rubber losing momentum

Mercedes-Benz is bullish on India for which it is doubling capacity from 10,000 units per year at present to 20,000 units per year. Mercedes-Benz India will invest `.250 crore. The growth in passenger car segment had been southwards, while the growth in the luxury car segment has been just the opposite. According to company’s estimates, the luxury car market in India will be 4% of the total passenger car segment by 2020, which is estimated at nearly eight million units.

Rubber extended decline as a drop in oil and a slowdown in Chinese economic data hurt market sentiment. Brent crude dropped below $100 a barrel for the first time in a month and WTI declined amid speculation that stockpiles will climb after the Organization of Petroleum Exporting Countries kept its production target unchanged.

According to the Association of Planters of Kerala, natural rubber growing sector in Kerala is going to face an unprecedented situation soon, due to frequent fall in natural rubber prices and increasing cost of production. The cost of natural rubber production is shooting up as never before, with the price of raw materials, including fertilisers, going up by 40 to 50%. Rubber prices have fallen by 47% in the past 24 months, were as labour cost has gone up by 61% during the same period.

Rubber came under pressure as it lost support from the currency and energy markets. Rubber for delivery in November touched a low of ¥251.1 a kg and closed at ¥257 a kg on the Tokyo Commodity Exchange. The prices of RSS4 grade closed at `.169 a kg at Kottayam and the price of RSS3 closed at `.165.94 a kg at Bangkok, while Malaysian SMR20 closed with a positive note at `.134.60 a kg.

Read lot more in Rubber4U – 15th June 2013 issue