Growth in auto sector may create acute shortage in NR supply

Natural rubber production fell 10% to 627,000 tonnes in April-December 2013 period. Heavy rains from July to September cut latex output. The actual output is expected to be lower than the reported figure and this can be seen by the tightness in supply in the domestic market even though consumption hasn’t grown much. Natural rubber imports will surge to a record this year after monsoon rains cut production.

Consumption of natural rubber dropped 2% to 728,080 tonnes, during April-December 2013 period. Despite the depressed demand scenario, the supply-demand gap continues. Tyre companies accelerated imports after prices dropped in producing countries. Imports jumped 53% to 264,576 tonnes during April-December 2013 and is expected reach a record high during 2013-14.

Rubber stored in bonded warehouses in China's Qingdao port rose 5% to nearly 300,000 tonnes in December, raising fears that China could cut purchases in coming months, which is affecting sentiment. While supply is basically okay in Thailand, and production is still at its peak. Things could worsen in Thailand, where protesters trying to unseat the government are camped in central Bangkok.

Indian automobile sector, which consumes 65% of the rubber, a slowdown in automobile sales may weaken demand for tyres. Since 1st January 2014, the benchmark RSS4 grade rubber in India fell 8.25% to `.150 a kg at Kottayam, while RSS3 grade closed at `.144.93 a kg at Bangkok and Malaysian SMR20 closed at `.135.19 a kg. National Multi Commodity Exchange February 2014 futures closed at `.151.75 a kg, March at `.154.11, April at `.157.95 and May at `.160.38 a kg. Tokyo Commodity Exchange, January 2014 futures series closed at ¥264.2 a kg, February at ¥261.6, March at ¥251.5, April at ¥250.4, May at ¥252.1, and the contract for delivery in June 2014 closed at ¥253 a kg.

Read lot more in Rubber4U – 1st February 2014 issue

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