Is Thailand in the process of levy waiver!

As Asia began to cool off and the West remained sluggish, the prices of natural rubber have crashed, threatening the incomes of millions of farmers. Rubber farmers have blocked roads and railways in the past week to pressure the government to guarantee rubber prices as it has done for rice growers. Thailand government may waive levies on rubber exports so that shippers can pass on the saving to farmers. Thai government is likely to advise exporters to purchase raw rubber at prices above market rate.

Rubber resumed a rally as optimism grew that Europe’s economy may solidify its recovery and signs of renewed strength in the Chinese economy. China accounts for 33% of global demand and tyres represent 70% of natural rubber consumption in the country.

China has stepped up its rubber production over the last five years as it seeks to meet rising domestic demand and reduce imports. Production has also risen in other emerging producing countries like Vietnam, Laos, Cambodia and Myanmar.

From 2008-12, global rubber production increased by 3.7% a year, from 10.1 million tonnes in 2008 to 11.4 million last year. It is expected to reach 11.6 million tonnes this year. Consumption also increased by 3.1% a year for the same period, from 10.2 million tonnes in 2008 to 10.9 million last year. It is projected to reach 11.1 million tonnes this year.

At Kottayam, RSS4 grade closed at `.185.50 a kg, while RSS3 grade closed at `.178.62 a kg at Bangkok, Malaysian SMR20 closed at `.163.75 a kg. On the Tokyo Commodity Exchange, September futures series closed at ¥256.4, October at ¥258.8, November at ¥260, December at ¥263.1, January 2014 at ¥266.9 and the contract for delivery in February 2014 closed at ¥269.1 a kg. While on the National Multi Commodity Exchange September futures closed at `.183.50 a kg, October at `.182.75, November at `.183.24 and December at `.183.70 a kg. Tommorrow further downward trend can be noticed.

Read lot more in Rubber4U – 1st September 2013 issue

Manchester United announces sponsorship with Apollo Tyres

Manchester United Football Club and Apollo Tyres has announced a three-year regional partnership in which Apollo Tyres becomes the Club's Official Tyre Partner in the UK and India. Apollo Tyres will create football based play zones, using recycled rubber, in local communities in the UK and India to encourage healthy lifestyles among youngsters. This partnership will allow Apollo not only to promote its brand, but also to engage and communicate with Manchester United’s strong fans, close to 46 million following in UK and India. The tie-up will pay off for the brand and this could lead to customer acquisition instead of just customer awareness and builds a long term relationship with the brand.

Import to decrease as local prices falls

Global natural rubber market has managed to maintain the upward momentum, while the domestic market has dropped. As mentioned earlier August will be the testing ground for future trend. Rubber based industries - especially non-tyre sector is facing serious problems, due to advent of cheap imported goods and higher input costs. On the other hand, tyre industry is also facing crisis as offtake from the auto sector has scaled down and in turn has slowed down the demand for natural rubber.

 

At Kottayam, RSS4 grade closed at `.184 a kg, while RSS3 grade closed with a positive note at `.163.69 a kg at Bangkok, Malaysian SMR20 closed at `.150.57 a kg.  On the Tokyo Commodity Exchange, August futures series closed at ¥251.5, September at ¥253.7, October at ¥255, November at ¥256.1, December at ¥258 and the contract for delivery in January 2014 closed at ¥260.6 a kg, after touching a high of ¥263.7 and a low of ¥257.9 a kg. While on the National Multi Commodity Exchange September futures were trading at `.176.62 a kg, October at `.171.95, November at `.169.25 and December at `.169 a kg. at 4.30 pm IST.

August will be the testing ground

India's current account deficit hit a record high 4.8% of GDP, while its economic growth has slowed to a decade low of 5%. On Tuesday, Indian Rupee has dropped to all time low of 63.77 against US dollar, breaching the previous low of 62.03. Policymakers' measures to prop up the currency have so far proved ineffective. Further measures are expected but are unlikely to be effective in the current scenario, as rupee is estimated to go further down. It is estimated to touch 64.45 mark.

On the Tokyo Commodity Exchange, August futures series were trading in negatives at ¥255.5, September at ¥255.7, October at ¥256.3, November at ¥257.4, December at ¥260, and the contract for delivery in January at ¥262.3 a kg, on Tuesday at 13.10 JST.

As Rupee drops, rubber too drops

The Indian Rupee dropped to all time low of 62 against dollar. Natural rubber imports in July jumped 39.2% to 29,311 tonnes, when compared to July 2012. Drop in domestic production due to heavy rainfall has forced tyre manufacturers to increase import of the commodity. Rains giving way to the resumption of tapping in most plantations in Kerala, the production and supply may improve in the coming weeks. The natural rubber prices dropped on buyer resistance, amidst low volumes as there had been no quantity sellers in the market.

Sheet rubber declined to `.188 a kg at Kottayam, while RSS3 grade closed with a positive note at `.159.91 a kg at Bangkok, Malaysian SMR20 closed at `.146.41 a kg. On the Tokyo Commodity Exchange, August futures series closed at ¥255.7, September at ¥261.2, October at ¥261.8, November at ¥262.8, December at ¥265.1, and the contract for delivery in January closed at ¥267 a kg. On National Multi Commodity Exchange, natural rubber September futures closed at `.179.28, October at `.171.24, November at `.167.98 and December at `.167.61 a kg.

Read lot more in Rubber4U – 1st September 2013 issue

Rubber4U Forecast for 2013-14

Waiting is over

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Rubber4U

Rubber4U - 15th August 2013 issue

Car sales down

According to a data released by Society of Indian Automobile Manufacturers, India’s passenger car sales declined by 7.4% to 1,31,163 units in July 2013 from 1,41,646 units sold in July 2012. Motorcycle sales in July 2013 declined by 1.52% to 8,09,312 units from 8,21,821 units, two-wheeler sales declined by 0.06% to 11,31,992 units from 11,32,696 units, sales of commercial vehicles declined by 14.93% to 55,301 units from 65,008 units in July 2012.

India’s exports rose 11.64% in July to $25.83 billion and imports fell 6.2% to $38.1 billion, when compared to July 2012. The trade deficit was at $12.27 billion, keeping pressure on the current account deficit.

At Kottayam, RSS4 grade closed at `.195.50 a kg, while Malaysian SMR20 closed at `.143.59 a kg. On the Tokyo Commodity Exchange, August futures series closed at ¥260, September at ¥262.6, October at ¥262.2, November at ¥262.2, December at ¥263.6 and the contract for delivery in January 2014 closed at ¥265.2 a kg, after touching a high of ¥266.3 and low of ¥261.3 a kg. While on the National Multi Commodity Exchange August futures were trading at `.194.95 a kg, September at `.186.25, October at `.177.20, November at `.170.01 and December at `.170 a kg. at 4.50 pm IST.

Lots of measures and expectations

The rupee has lost around 12% to the dollar since the start of May and hit a record low of 61.80 to the dollar on Tuesday. The RBI unveiled further measures late on Thursday to drain cash from the financial system by auctioning government cash management bills every week. The government is likely to announce a slew of measures, including raising duties on non-essential goods and relaxing norms for overseas fund raising by corporate, to stabilise the rupee. The steps by the government would be in addition to those already announced by the Reserve Bank to contain the sliding rupee. Finance Minister had earlier said that the government is working on relaxing External Commercial Borrowings norms for corporate as well considering allowing public sector undertakings to issue quasi-sovereign bonds which could fetch foreign exchange.

Economy has been stuck below 5% for the past two quarters and analysts expects India to report a second straight contraction in industrial production in June, as industrial activity is not picking up and investment activity is stagnant.

Tokyo Commodity Exchange and all other market closed with a positive note and it is expected that tommorrow, most probably TOCOM will cross ¥260 a kg mark for August contract and for January contract it may touch ¥265 a kg mark.

More action in waiting

Rubber contract on Tokyo Commodity Exchange for January delivery rose to a 10 weeks high of ¥261.3 per kg. The contract jumped after China's industrial output rose 9.7% in July. Most Asian stocks rose as concern eased that growth in China is slowing and after U.S. jobless claims fell to the lowest monthly rate since before the financial crisis. Demand for rubber will improve and China’s natural rubber imports gained 16% in July from a month earlier to 150,000 tonnes. According to the Japan Automobile Tyre Manufacturers Association, Japan’s new vehicle tyre sales rose 14% on month to 4.45 million units in July. Crude rubber inventories at Japanese ports fell to 8,470 tonnes as of 31st July, down by 1,722 tonnes, the lowest level since 20th January, according to Rubber Trade Association of Japan.

At Kottayam, RSS4 grade closed at `.196 a kg, while RSS3 grade closed at `.155.58 a kg at Bangkok. On the Tokyo Commodity Exchange, August futures series closed at ¥256.5, September at ¥258.7, October at ¥258.4, November at ¥258.3, December at ¥259.7 and the contract for delivery in January 2014 closed at ¥261.3 a kg, after touching a high of ¥264 and low of ¥257.7 a kg. While on the National Multi Commodity Exchange August futures closed at `.195.77 a kg, September at `.185.78, October at `.176.23, November at `.170 and December at `.169.10 a kg.

Low prices prop-up margin

For the April-June quarter Apollo Tyres Ltd. reported better-than-expected earnings. Sales saw a marginal 0.8% growth, even during the sluggishness in the automobile industry. Sales were driven by the Europe and African operations. Compared with a year ago, natural rubber prices during the quarter were 13% lower. This reduced the cost of raw materials, which in turn helped the company improve the operating profit margin.

Rubber prices are increasing in the domestic market. Adverse weather conditions and heavy rains in some parts of Kerala have affected rubber production, which reduced supplies in the market, driving the benchmark RSS-4 grade rubber towards `.200 per kg. Prices in the international market, on the other hand, continue to remain low, which is currently trading at `.152.87 per kg in Bangkok.

The one bright spot for companies was low commodity costs, which meant low input costs and brought much-needed succour to margins at a time when demand is lukewarm. But even that comfort may not last, thanks to the rupee depreciation and the spike in short-term interest rates. Margins seem to be under pressure again.

Tyre companies may step up imports. But duties, freight and the sharp fall in rupee means that the potential cost saving can be limited. Automobile companies in India may resist the price hikes as sales continue to remain sluggish.

Heavy rains disrupting rubber tapping in Kerala and the growers are holding on to the available stock in anticipation of further rise in natural rubber prices. Besides supply and demand factors, the market will also be influenced by the performance on the Tokyo Commodity Exchange and the Shanghai Futures Exchange. Tommorrow, most probably TOCOM will cross ¥250 a kg mark.

More downtrend in waiting

Crude oil prices are sliding with a weaker-than-expected jobs report in the United States casting a cloud over demand. The unemployment rate fell to 7.4% in July from 7.6% in June.

Indian rupee ended at an all-time closing low of 61.10 to a dollar. Unchanged interest rates by the central bank, widening current account deficit and poor policy response from the Government were putting pressure on the rupee. According to Reserve Bank of India (RBI), India's foreign exchange reserves shot up by $960.2 million to $280.17 billion on the back of a healthy rise in currency assets in the week ended 26th July.

RBI Governor Duvvuri Subbarao said we will roll back liquidity tightening measures only after we determine that stability has been restored to the foreign exchange market. In the Reserve Bank's view, undue volatility of the exchange rate is harmful for growth and stability, and such volatility should be curbed.

The government’s move to ease foreign investment norms and increase limit for FDI is likely to boost the confidence of foreign investors, which in turn will provide much needed momentum to the country’s economy.

Rubber prices closed mixed in thin trading as market participants were winding down their holdings ahead of the long holidays. Market remained quiet in tandem with the Tokyo Commodity Exchange, due to a strong yen against the US dollar and declining Japanese equities. Asian rubber prices were expected to drop further due to slow demand and rising supply from Thailand.

The shortage of natural rubber and decrease in production has pushed up the domestic prices. On Monday in the international market the trend will be negative.

Rubber forecast for 2013-14

Positive measures

Indian government announced a 1% increase in the interest subvention offered to exporters, effective from 1st August, in a bid to prop up falling exports. Presently, they are getting an interest subvention of 2% and the commerce minister has assured that all pending claims of interest subvention would be cleared immediately. The government is also considering raising the plan allocation for market access initiative, market development assistance and central assistance to states for developing export infrastructure and other allied activities scheme.

According to Reserve Bank of India, liquidity tightening steps were not a panic reaction; measures are aimed at checking undue volatility in the foreign exchange market and will be rolled back in a calibrated manner as stability is restored to the foreign exchange market.

Today, RSS3 grade closed with a positive note at `.150.07 a kg at Bangkok, while Malaysian SMR20 closed at `.135.74 a kg. On the Tokyo Commodity Exchange, August futures series closed at ¥245, September at ¥242.3, October at ¥242.8, November at ¥243.7, December at ¥244.9, and the contract for delivery in January closed at ¥245.8 a kg. On National Multi Commodity Exchange, natural rubber August futures were trading at `.194.01, September at `.182.65, October at `.171.90, November at `.166.40 and December at `.167 a kg, at 2.15 pm IST.

Read lot more in Rubber4U – 15th August 2013 issue