Rubber4U

Rubber4U - 1st November 2013 issue

Farmers stage hartal

China, the leading global consumer of natural rubber, having imported 2.18 million tonnes of natural rubber in 2012, has bought around 54,000 tonnes of Ribbed Smoked Sheet grade natural rubber on Tuesday for government stockpiles.

Sharp fall in natural rubber prices has been causing serious concern in Kerala, India. Today, normal life was hit in Kottayam due to hartal called by pro-Left farmer’s outfits demanding ban on import of rubber in view of crash in prices. Kottayam and the adjoining areas have a large number of small and medium cultivators. The mobility of the people was seriously affected as private buses and autorickshaws kept off the roads, Shops and business establishments remained closed. The farmers were demanding that either a ban on import of rubber or increase in the import duty to shore up the price of the domestic output.

RSS4 grade closed at `.159.50 a kg at Cochin, while National Multi Commodity Exchange November futures closed at `.161.09 a kg, December at `.162.87 and January 2014 at `.164.73 a kg. RSS3 grade closed at `.155.48 a kg at Bangkok and Malaysian SMR20 closed at `.142.38 a kg. While Tokyo Commodity Exchange, November futures series closed at ¥250.2 a kg, December at ¥253.1, January 2014 at ¥255.9, February at ¥258.9, March at ¥261.8 and the contract for delivery in April 2014 at ¥264.3 a kg. On Thursday most probably market is expected to be in green.

Lending rates to increase

Reserve Bank of India Governor Raghuram Rajan has raised its policy repo rate by 25 basis points to 7.75% for the second time in two months to fight inflation. The move would possibly nudge banks to hike their loan rates. The new policy is focused to contain inflationary expectations, with or without support from fiscal policy.

Expect better days on U-turn

Rubber prices in India have slumped on increasing imports and major consumers keeping away from the local market. Natural rubber growers are concerned over daily fall in natural rubber prices, which has reached `.159 a kg at Kottayam, lowest since 26th April 2013. According to growers there had been a mismatch between the input cost and the price they fetch. Growers, traders and political parties hold the steady increase in natural rubber import by the user industry as main factor for decline in domestic prices.

International prices of rubber have fallen too, in the wake of slowdown in the automobile industry. Since the international prices (RSS3 at `.155.23 a kg) have been ruling lower than the domestic prices, Indian tyre manufacturers prefer imports. Rubber4U estimate that if the import continued at the current level, the domestic natural rubber prices may touch `.155 a kg level, before making a U-turn, as major consumers starts to increase their inventory through local purchase.

On Saturday, RSS4 grade closed at `.159 a kg at Kottayam, showing a negative trend. While today, National Multi Commodity Exchange November futures trading at `.159.15 a kg, December at `.160.50 and January 2014 at `.162.30 a kg at 12.15 IST. RSS3 grade closed at `.155.23 a kg at Bangkok and Malaysian SMR20 closed at `.142.54 a kg. While Tokyo Commodity Exchange, November futures series closed at ¥246.4 a kg, December at ¥248.7, January 2014 at ¥251.4, February at ¥254.7, March at ¥257.5 and the contract for delivery in April 2014 at ¥260 a kg. On Tuesday most probably market is expected to be in green.

Tommorrow, Reserve Bank of India will be taking some measures in its monetary policy review and will have to wait and watch whether it is going to retain CRR and repo rates or hike the rates.

Read lot more in Rubber4U – 1st November 2013 issue

Lots of expectation against low demand

According to industry consultant and analyst LMC Automotive, global auto sales in September rose 4.5% from a year ago. China was the leading nation in September auto sales, at 1.9 million in sales. According to Reserve Bank of India's consumer confidence survey - June 2013, only 12.8% of respondents wanted to purchase a vehicle compared with 15.9% in March 2013 and 19.7% in December 2012. This suggests a steadily worsening consumer sentiment, which could negatively impact sales in coming months. There is a limited scope for banks to reduce interest rates further, considering the recent repo rate revision to 7.50% from 7.25% earlier. According to Montek Singh Ahluwalia, deputy chairman of planning commission, India’s current account deficit could drop to below 3.8% in the current fiscal.

The US government ended its partial shutdown by a last minute deal passed by both the Republican led House of Representatives and Democrat dominated Senate. Oil prices were also supported by wide expectations that the U.S Federal Reserve would delay its tapering of stimulus monetary policy.

According to China's National Bureau of Statistics, country's GDP growth accelerated to 7.8% in the third quarter of the year, up from 7.5% in the second quarter. According to General Administration of Customs, in September 2013, China’s natural rubber import increased 5.9% to 180,000 tonnes compared to the previous month. According to dealers' estimates, inventory of natural and synthetic rubber in China's bonded warehouses in Qingdao slipped to 259,600 tonnes as of 15th October, compared with 271,000 on 29th September.

Rubber prices in India have slumped on increasing imports and major consumers keeping away from the market. On Saturday, RSS4 grade closed at `.161.50 a kg at Kottayam, showing a negative trend. While currently, National Multi Commodity Exchange November futures trading at `.161.35 a kg, December at `.163.30, and January 2014 at `.166.20 a kg, at 12.35 IST. Monday, RSS3 grade closed at `.157.58 a kg at Bangkok, while Malaysian SMR20 closed at `.143.97 a kg. While Tokyo Commodity Exchange, October futures series closed at ¥253.9 a kg, November at ¥255.6, December at ¥257.9, January 2014 at ¥261.1, February at ¥264.7 and the contract for delivery in March 2014 at ¥268.4 a kg. On Tuesday most probably market is expected to be in green.

What our readers say: http://rubber4u.com/Public/Views.pdf

Read lot more in Rubber4U – 1st November 2013 issue

Lower interest rates to boost demand

Uncertain global economic conditions, combined with outflow of foreign funds from stock markets, among other factors, saw rupee plunging to nearly 70 against the US dollar. However, in recent weeks, the rupee has recovered and is trading at little over 60 level against the dollar. The government has also initiated various measures to boost the economy. Industrial growth slowed in August after staging a tentative recovery in the previous month, dragged down by continued weakness in the manufacturing and mining sectors, raising fresh worries for the government. Industrial output rose 0.6% in August compared to a 2% expansion in the year earlier month. The manufacturing sector fell 0.1% in August compared to 2.4% expansion in August 2012 while the mining sector contracted 0.2% compared to a decline of 0.3% in the previous year-ago period.

The industrial segment has been hit hard by a combination of factors ranging from stubborn inflation, high interest rates, slowing demand, regulatory and policy delays. India Inc stepped up calls for cutting interest rates to boost demand and jumpstart industrial activity. Increased lending to consumers at lower interest rates will greatly benefit industry by encouraging festival season demand.

On Saturday, RSS4 grade closed at `.165 a kg at Kottayam. While National Multi Commodity Exchange October futures closed at `.164.48 a kg, November at `.166.02, December at `.168.03 January 2014 at `.169.78 and February at `.171.83 a kg. On Friday, RSS3 grade closed at `.157.34 a kg at Bangkok, while Malaysian SMR20 closed at `.146.43 a kg. While Tokyo Commodity Exchange, October futures series closed at ¥251 a kg, November at ¥253, December at ¥255.9, January 2014 at ¥259, February at ¥261.9 and the contract for delivery in March 2014 at ¥264.5 a kg. On Monday market is expected to be in green.

What our readers say: http://rubber4u.com/Public/Views.pdf

Read lot more in Rubber4U – 15th October 2013 issue

Steady day expected

Indian rupee bounced back and closes at an almost two month high of 61.39 against the dollar amid sales of the US currency. According to a survey by industry body Ficci, it has lowered the country's economic growth forecast for 2013-14 to 5% from 6% projected in July, indicating tough times ahead. The GDP growth forecast for 2013-14 stands at 5%. The survey further revealed that expectations with regard to performance of the industrial sector have also taken a hit. The Index of Industrial Production (IIP) is expected to grow by 1.7% in 2013-14, which is half the 3.5%t growth that was projected in the previous round of the survey held in July 2013.

On Friday, National Multi Commodity Exchange October futures were trading at `.165.50 a kg, November at `.167, December at `.168.89 and January 2014 at `.170.60 a kg, at 11.05 am IST. While Tokyo Commodity Exchange, October futures series were trading at ¥253 a kg, November at ¥254.3, December at ¥257.4, January 2014 at ¥260.5, February at ¥263.6 and the contract for delivery in March 2014 at ¥266 a kg. at 11.45 JST.

What our readers say: http://rubber4u.com/Public/Views.pdf

ARC in progress, Growers seeks curbs, Consumers opposes

The sixth Annual Rubber Conference of the Association of Natural Rubber Producing Countries started at Galadari Hotel in Colombo. More than 119 representatives from eleven countries are participating in the Conference. Sri Lankan Plantation Industries Ministry sources said that the objectives of the conference is to improve productivity, reduce cost of production, promote value added rubber products, and generate additional revenue sources related to the rubber sector, encourage manufacturing economic friendly natural rubber products and enhance the sustainability of the natural rubber industry.

Replacement market will continue to be strong over the next couple of years.  Around 70.72 lakh passenger vehicles and nearly 19 lakh commercial vehicles have been added to the Indian roads during 2010-2012, whose tyres will be due for replacement in the near future.

Due to shortage and low production levels of natural rubber, tyre manufacturers have imported around 135,000 tonnes of rubber so far. Falling rubber prices have created panic among rubber growers who feel that import of rubber has worsened the situation and has urged the Union government to hike import duty and check duty-free imports. While addressing a rubber grower’s dharna before the head office of the Rubber Board at Kottayam, Jose K. Mani, MP, urged the government to ban import of rubber for at least a year to tide over the crisis. But Automotive Tyre Manufacturers Association (ATMA) clarified that the natural rubber being imported now was in fact contracted four to eight weeks ago when production dropped drastically in the country.

All India Rubber Industries Association and ATMA are strongly against this and demanded not to increase the duty and allow duty free import up to 200,000 tonnes during 2013-14. Even at higher prices, rubber was not available in the domestic markets and suggested import was a must for the survival of industries. Any hike in the natural rubber import duty will choke the growth of the industry, which was already passing through a difficult phase due to a slowdown in the auto industry.

Today, RSS4 grade closed at `.166.50 a kg at Kottayam, while RSS3 grade closed at `.156.66 a kg at Bangkok, Malaysian SMR20 closed at `.145.26 a kg.

What our readers say: http://rubber4u.com/Public/Views.pdf

Positive trend expected

Around 8500 rubber dealers were on strike against the RSS4 grade price falling to `.172 per kg. Natural rubber price slid further to `.166 per kg, resulting in a price crash of `.6 per kg just in a week. Slowing industrial demand for rubber in the domestic market and rising rubber imports reflect a pro-industry situation. Indian Rubber Dealers' Federation (IRDF) has put up before the commerce ministry that the Centre should gear up for rubber procurement if industrial demand does not pick up in coming days.

In April, the Union commerce minister had given the assurance to ramp up import duty on natural rubber to `.34 from the current `.20 per kg. This needs to be done at the earliest, George Valy, IRDF president.

According to Rubber Board of India, natural rubber imports increased 208.41% to 45,581 tonnes in September 2013 compared to 14779 tonnes recorded in 2012. Natural rubber production eased nearly 5% on year to 78,000 tonnes.

On Monday, RSS4 grade closed at `.165 a kg at Kottayam. While National Multi Commodity Exchange October futures closed at `.168.98 a kg, November at `.169.39, December at `.171.32 January 2014 at `.173.80 and February at `.176 a kg. On Tuesday, RSS3 grade closed at `.157.15 a kg at Bangkok, while Malaysian SMR20 closed at `.145.24 a kg. While Tokyo Commodity Exchange, October futures series were trading at ¥251 a kg, November at ¥253, December at ¥255.4, January 2014 at ¥258.6, February at ¥261.5 and the contract for delivery in March 2014 at ¥264 a kg. at 14.25 JST.

What our readers say: http://rubber4u.com/Public/Views.pdf

Uncertainty and volatility expected to continue

Oil prices rose due to lower production from Gulf of Mexico, where a tropical storm forced the companies to shut down several oil rigs. Crude oil prices could further rise next week if the current US shutdown (first government shutdown in 17 years) continues and a weaker dollar usually boosts the prices of dollar denominated commodities. 

India's economic growth rate slipped to a decade low of 5% in 2012-13 and declined to 4.4% in the first quarter (April-June) of the current financial year. The Reserve Bank of India expects the economy to grow by 5 to 5.5% in the current fiscal, pinning its hopes on good farm output and improved exports. The Prime Minister's Economic Advisory Council scaled down its growth forecast for the current fiscal to 5.3% from 6.4% earlier.

India is undergoing a significant period of economic uncertainty and volatility. Monsoon has been good; hopefully, this will translate into an increase in consumption mainly driven by rural demand. According to auto industry estimates, in the run-up to the festive season, the value of discounts, which is already higher than those offered last year, may inch up only marginally from the current levels as there is upside pressure on margins, led by a depreciating rupee and higher fixed costs.

Apollo is aiming to gain a foothold in China and the United States through the pending acquisition, but the deal is being opposed by workers at Cooper's joint venture in China, and has further run into trouble over demands made by labour from the United Steel Workers union.

In the domestic market, National Multi Commodity Exchange October futures closed with a positive note at `.169.37 a kg, November at `.168.97, December at `.170.75 and January 2014 at `.172.54 a kg.

What our readers says: http://rubber4u.com/Public/Views.pdf

Aim to develop rubber industry

Malaysia and Thailand have agreed to co-operate on the Rubber City project located on the Thai-Malaysian border, aimed at developing the rubber industries of both countries. Under the proposed project, a city would be created in the border area linking Dan Prakob in Songkhla's Na Thawee district and Kota Putra in the Malaysian state of Kedah. Malaysia wants Thailand to supply raw materials to support its industries producing items such as rubber gloves and tyres.

According to latest data, there is an improvement in China’s economy; which in turn boosting speculation that rubber demands will grow from the largest consumer. Natural rubber consumption will climb 1.5% this year and 4.1% in 2014 from 11.04 million tonnes in 2012. According to experts rubber demand for tyres are expected to grow 3.5% a year to 2020.

Today, RSS3 grade closed at `.155.35 a kg at Bangkok, while Malaysian SMR20 closed at `.143.53 a kg. On the Tokyo Commodity Exchange, October futures series closed at ¥242.8 a kg, November at ¥244.5, December at ¥247, January 2014 at ¥249.8, February at ¥252 and the contract for delivery in March 2014 closed at ¥254.3 a kg. While on the National Multi Commodity Exchange October futures were trading at `.166.49 a kg, November at `.165.99, December at `.168 and February 2014 at `.172.97 a kg at 12.10 pm IST.

What our readers says: http://rubber4u.com/Public/Views.pdf

Read lot more in Rubber4U – 15th October 2013 issue