Rubber not going to be positive

The rupee rose to its strongest in 11 months against the US dollar on expectations of robust foreign interest in domestic shares and debt after the Bharatiya Janata Party swept to victory in the elections. Imported rubber is cheaper than domestic supplies even after paying `.20 per kg duty.

According to the All India Rubber Industries Association, cess can be levied only on rubber produced in India under the Rubber Act and excludes imported rubber from the purview of the Act. No such notification as to the levy of the cess as an additional duty under the Customs Tariff Act had been issued. Also, there are no provisions in the Foreign Trade Policy regarding levy of Rubber Cess on the imported rubber. Currently, `.2 a kg is being collected as cess on imported rubber. Association has already sought clarifications on the issue from the Rubber Board. Rubber industries have asked for immediate discontinuation of cess on imported rubber citing that there is no law which authorises the Customs department to levy rubber cess.

Indian natural rubber imports are likely to soar over 70% in the three months that end in June, compared to same period of 2013, as a strong currency and lower global prices prompt tyre manufacturers to increase import. Imports could rise above 100,000 tonnes in the June quarter and increased imports would prop up international prices, which have fallen on concerns over economic growth in China and plans by Thailand to sell 200,000 tonnes from its stockpiles.

Rubber supply has hit a nine year high this month and decision by Thailand to release 200,000 tonnes of rubber from the stock, will make the situation more severe and according to the IRSG, world natural rubber supply is forecast to outstrip demand by 241,000 tonnes in 2014. Rubber prices are likely to struggle near multi-year lows in the short-term, hurt by worries over China's economy and Thailand's plan to make huge sales from its state stockpiles.

On Friday, the benchmark RSS4 grade rubber closed at `.147 a kg at Kottayam, while RSS3 grade closed at `.123.63 a kg at Bangkok and Malaysian SMR20 closed at `.100.63 a kg. On National Multi Commodity Exchange, June 2014 futures closed at `.150.17 a kg, July at `.151.75, August at `.150.50 and September at `.149.99 a kg, while rubber mini contract for June closed at `.151.60 a kg. On Tokyo Commodity Exchange, May 2014 futures series closed at ¥193.4 a kg, June at ¥196, July at ¥198, August at ¥199.8, September at ¥203.1 and the contract for delivery in October 2014 closed at ¥204.3 a kg.

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Market sluggish, weakness continues

The weakness continued in rubber prices due to expected more supply in the market soon because of the end of wintering season and in turn helping tyre companies maintain margins at elevated levels. The benchmark rubber contract on the Tokyo Commodity Exchange (TOCOM) for October delivery fell 2.4% or ¥5 a kg, to settle at ¥200 per kg. The most active rubber contract on the Shanghai futures exchange for September delivery fell 370 yuan to close at 13,820 yuan per tonne.

On Friday, the benchmark RSS4 grade rubber closed at `.142 a kg at Kottayam, while RSS3 grade closed at `.123.56 a kg at Bangkok and Malaysian SMR20 closed at `.101.31 a kg. On National Multi Commodity Exchange, June 2014 futures were trading at `.144.50 a kg, July at `.145.75, August at `.145.50 and September at `.145 a kg, while rubber mini contract for June was at `.145 a kg. On Tokyo Commodity Exchange, May 2014 futures series closed low at ¥190 a kg, June at ¥193.8, July at ¥196.4, August at ¥197.5, September at ¥199.4, and the contract for delivery in October 2014 closed at ¥200 a kg.

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Rubber4U - 15th May 2014 issue

Plan to form buffer stock

On 9th May, at the stakeholders' meeting held at Rubber Board’s headquarters in Kottayam, tyre and rubber products manufacturers have proposed the idea of forming a buffer stock of 30,000 tonnes of natural rubber funded by the public-private partnership model. Under the proposed model, the funding expenses would be met by the consuming industries or the state government on behalf of the producing community, or funding by the central government through the department of commerce. 

On Saturday, the benchmark RSS4 grade rubber closed at `.139 a kg at Kottayam. While the latest closing for RSS3 grade was at `.120.79 a kg at Bangkok and Malaysian SMR20 closed at `.100.04 a kg. On National Multi Commodity Exchange, May 2014 futures closed at `.136.96 a kg, June at `.141.57, July at `.143.06 and August at `.142.80 a kg. While rubber mini contract for May closed at `.136.75 and June at `.140.10 a kg. On Tokyo Commodity Exchange, May 2014 futures series closed at ¥194.9 a kg, June at ¥197.1, July at ¥197.7, August at ¥199, September at ¥199.1, and the contract for delivery in October 2014 closed at ¥198.3 a kg. On Monday a positive trend is expected.

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Weakness continues

India's factory growth showed no sign of acceleration last month as lukewarm demand restrained output even as price pressures eased. The momentum in the manufacturing sector held broadly steady, with domestic demand countering a slowdown in export orders. Both input and output prices rose at their slowest pace in about a year.

At a meeting of industry leaders with Amitabh Kant, the new Secretary of Department of Industrial Policy and Promotion, the industry has demanded for a comprehensive national rubber policy on the lines of auto sector policy, as it touches the lives of over 10 lakh growers and has a rich and diverse value chain encompassing tyres, conveyer belts, auto components, footwear, medical supplies, sports equipment, etc. The issue has been raised just before the stakeholders’ consultations at the Rubber Board’s headquarters in Kottayam on 9th May. The policy is already under consideration by the Commerce Ministry.

The Reserve Bank of India left rates on hold at 8% last month. Auto volumes are unlikely to grow in double digits during 2014-15, even if a stable government comes to power, as consumer sentiment remains weak and a pick-up is not likely in the near term.

The Thailand Agriculture and Cooperatives Ministry will sell 220,000 tonnes of stockpiled rubber.  It was costing around 20 million baht a month to store the stockpile. As there is no rubber output in the market at this time, it is necessary for the government to release the stockpile as soon as possible, before the new harvest season starts later this month. Rubber price was still in downward trend, the stockpile would deteriorate if kept too long and this would affect the market price.

Today, the benchmark RSS4 grade rubber closed at `.138.50 a kg at Kottayam. RSS3 grade closed at `.120.79 a kg at Bangkok and Malaysian SMR20 closed at `.100.69 a kg. On Tokyo Commodity Exchange, May 2014 futures series closed at ¥198.1 a kg, June at ¥199.6, July at ¥200, August at ¥200.1, September at ¥200.5, and the contract for delivery in October 2014 closed at ¥199.3 a kg. On National Multi Commodity Exchange, May 2014 futures were trading at `.135.80 a kg, June at `.139.75, July at `.141, August at `.140.90 and September at `.139.97 a kg, at 15.50 IST.

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Read lot more in Rubber4U – 15th May 2014 issue