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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