Saturday, October 18, 2014

NR still under pressure as crude oil looks bearish

Fall in crude oil prices spells bad news for natural rubber growers. With Brent crude oil prices plunging to a four-year (has fallen to US$80 per barrel), natural rubber prices, too, are set to come under pressure, because as crude prices drop, the rates of synthetic rubber will also drop. Consumption of synthetic rubber in India has increased in the first quarter of 2014-15 to 58.9% against 57.6% last year.

The government should encourage rubber replantation and offer rubber growers subsidies to plant new trees. Automotive Tyre Manufacturers’ Association wants these measures implemented in order to address the reluctance of growers to plant new trees, which can’t be tapped for their first six to seven years. Without encouragement, the ATMA fears growers will continue to tap older lower yielding trees.

According to a Kerala state government official, state will buy rubber at `.5 per kg more than prevailing market price from farmers and the cabinet has decided to buy rubber through state-run agencies. Kerala chief minister Oommen Chandy demanded a total ban on rubber imports, besides seeking imposition of higher duty rates on synthetic, sheet and block rubber and other rubber products.

The Indian government has fixed new gas price at US$5.61 per million british thermal unit, increased from US$4.2 per million british thermal unit earlier, while it has reduced diesel price in Delhi by `.3.37 per litre following sharp fall in crude oil prices in international markets. This new gas price hike will be effective from 1st November, while the diesel price cut will be effective from today midnight.

Rubber prices, however, improved in Asian market as China came up with better trade data and on talks of producers in South-East Asia planning supply curbs. According to the latest data, benchmark RSS4 grade rubber closed at `.123 a kg at Kottayam, while RSS3 grade closed at `.99.58 a kg at Bangkok and Malaysian SMR20 closed at `.92.16 a kg. On National Multi Commodity Exchange November 2014 futures closed at `.122.71 a kg, December at `.121.52, January 2015 at `.122.25, February at `.121.20, March at `.121.80 and April at `.122 a kg. Tokyo Commodity Exchange, October 2014 futures series closed at ¥178.2 a kg, November at ¥181.5, December at ¥182.6, January 2015 at ¥185.6, February at ¥188.5 and the contract for delivery in March 2015 closed at ¥189 a kg.


For 2014-15 Rubber Forecast, http://rubber4u.com/Public/RForecast.pdf

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