Rubber4U

Rubber4U - 1st December 2014 Issue

While oil falls, rubber follows it

Crude oil prices have fallen 30% since June on sluggish global demand and rising production from the US. Today, the Brent crude price closed at $77.75 a barrel, while WTI crude closed at $73.69 a barrel. US January crude contract may drop to a 4½ year low of US$69 a barrel.

China's central bank cut its benchmark lending and deposit rates last week for the first time in more than two years, taking markets completely by surprise, and is expected to ease policy further.

Reserve Bank of India (RBI) will have to take into account global factors while determining policy rates in India. The economy around the world faces a trend of disinflation owing to slowing economies and a sharp drop in crude oil prices. The past few weeks have witnessed a heated debate on whether the RBI should cut policy rates or maintain status quo. On 2nd December, one can expect a surprise.

The government may extend excise duty concessions on automobiles beyond 31st December 2014 as the industry continues to struggle with sluggish demand due to high interest rates. The government is also likely to introduce the constitutional amendment bill for the goods & services tax in the winter session of parliament.

The benchmark RSS4 grade rubber closed at `.117.50 a kg at Kottayam, while RSS3 grade closed at `.99.73 a kg at Bangkok and Malaysian SMR20 closed at `.93.97 a kg. On National Multi Commodity Exchange December 2014 futures closed at `.115.82 a kg, January 2015 at `.116.90 and February at `.118.14 a kg. On Tokyo Commodity Exchange, December 2014 futures series closed at ¥187.6 a kg, January 2015 at ¥191.5, February at ¥194.2, March at ¥197.1, April at ¥199.1 and the contract for delivery in May 2015 closed at ¥200 a kg. On Friday, most probably Tocom futures contract for delivery in May 2015 may trade between ¥196 & ¥202 a kg.

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

Producers agrees to manage supply, to stabilise prices

Thailand, Indonesia and Malaysia, which supply around 67% of the world's natural rubber, have agreed to manage NR exports to the global market to ensure there is no excess supply and also agreed not to expand new rubber planting areas beyond targets set earlier and to boost domestic rubber consumption by 10% annually.

Rubber associations from Thailand to Cambodia have this year urged producers not to sell the commodity below a minimum price of $1.50 per kg, while Thailand later approved a subsidy plan worth around $1.8 billion to support farmers. Thai government kicked off the program four days ago for rubber growers nationwide. Rubber planters in the southern province of Satun-Thailand have received the assistance fund from the government to compensate their losses from dropping rubber prices. Each planter is entitled to a compensation of 1,000 baht per rai, with no more than 15,000 baht per household. These measures will help global rubber prices recover from their lowest levels since 2009, but they remains under pressure from slower Chinese demand.

The International Tripartite Rubber Council (ITRC) Ministerial Committee Meeting 2014, chaired by Malaysia, is expected to set up a regional rubber market within 18 months as one of the corrective measures to stabilise rubber prices. The regional rubber market will merge the markets of the main natural rubber producing countries providing better price discovery and effective hedging functions to benefit producers, consumers and market players.

The benchmark RSS4 grade rubber closed at `.117 a kg at Kottayam, while RSS3 grade closed at `.101.82 a kg at Bangkok and Malaysian SMR20 closed at `.95.09 a kg. On National Multi Commodity Exchange December 2014 futures closed at `.115.85 a kg, January 2015 at `.115.94 and February at `.116.66 a kg. On Tokyo Commodity Exchange, November 2014 futures series closed at ¥189.6 a kg, December at ¥195.6, January 2015 at ¥199.1, February at ¥201.9, March at ¥204.5 and the contract for delivery in April 2015 closed at ¥206 a kg. On Friday, most probably Tocom futures contract for delivery in April 2015 may trade between ¥201 & ¥207 a kg.

Rubber price down as oil prices falls

Sluggish growth and downward pressure on inflation due to sliding global oil prices prompted the Bank of Japan to unexpectedly expand its massive monetary stimulus last month. The world's third-largest economy, Japan had been forecast to rebound by 2.1%, but GDP fell at an annualized 1.6% pace in July-September 2014. Japan's economy unexpectedly slipped into recession in the third quarter.

Crude oil prices slipped below $75 for the first time in more than four years. Cheaper crude oil means lower prices for synthetic rubber and there is a possibility that natural rubber prices may fall to `.98 per kg level. Indian rubber growers have stopped the production to cut their losses. According to them current rubber prices are not high enough to cover the cost of labour used to harvest and process the commodity.

Following requests to Chinese government leaders to buy more agricultural products from Thailand, negotiations at the ministerial level are underway for Thailand to sell 2 million tonnes of rice and 200,000 tonnes of natural rubber to China on a government-to-government basis. Company representatives will arrive in Thailand on 19th November to discuss ways investment in the rubber industry in Thailand, while trade associations will discuss China's plan to boost its investment in Thailand.

Rubber producers in Asia are to meet this week to look at more measures to push up prices, which are not far above five-year lows, including restrictions on supply to global markets.

The benchmark RSS4 grade rubber closed at `.117 a kg at Kottayam, while RSS3 grade closed at `.100.17 a kg at Bangkok and Malaysian SMR20 closed at `.92.83 a kg. On National Multi Commodity Exchange December 2014 futures closed at `.115.35 a kg, January 2015 at `.115.55 and February at `.115.89 a kg. On Tokyo Commodity Exchange, November 2014 futures series closed at ¥187.6 a kg, December at ¥189.9, January 2015 at ¥193.5, February at ¥196.2, March at ¥198.9 and the contract for delivery in April 2015 closed at ¥200.2 a kg.

For reading Rubber4U – 15^th November 2014 issue: http://rubber4u.com/Public/Abcd.pdf

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

Industry worried about surging tyre imports

The Indian auto component industry is growing at a CGPA of 8.9% with two-wheelers being the largest domestic customer segment for the Indian auto components industry. This has encouraged two-wheeler tyre manufacturers to constantly experiment with newer technology and innovative ideas to deliver the growing market.

According to Automotive Tyre Manufacturers’ Association, tyre import has come to account for an estimated 20% of the total domestic market. Chinese government continues to provide multiple, direct and indirect, subsidies to push exports. The export prices from China are lower than that of such tyres in Chinese domestic market and also prices of similar exports originating from Thailand, South Korea. This clearly indicates dumping of tyres into Indian markets and causing injury to the domestic tyre industry.

The rubber industry is highly fragmented; producers have been unable to manage a cut in rubber supplies to a level low enough to support prices. The ban has proved hard to enforce, with millions of farmers spread over and many living from hand to mouth, forcing them to sell the commodity to get urgently needed cash. Even middlemen/traders have been forced to sell to keep their businesses running.

For reading Rubber4U – 15^th November 2014 issue: http://rubber4u.com/Public/Abcd.pdf

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

Rubber4U

Rubber4U - 15th November 2014 Issue

Rubber price down as import increases

Global crude oil prices were ruling at four year lows, raising hopes of another cut in petrol and diesel prices. Today, WTI crude oil trading in red, the prices fell to $77.23 per barrel at 13.15 GMT. Indian Oil companies had reduced petrol and diesel prices by `.2.41 and `.2.25 a litre respectively on 31st October, when the Indian basket was hovering around $84.77 a barrel. A revision in fuel prices is due on Saturday. Petrol and diesel prices could come down by another `.1 to `.2 per litre. Now India is planning to take advantage of subdued crude oil prices to get concessions for long-term supply contracts with major oil exporting countries.

Tokyo rubber futures, which set the tone for tyre-grade prices, are likely to hold in a narrow range this week, due to subdued demand from China. According to preliminary trade data issued by China's General Administration of Customs, the country imported 300,000 tonnes of natural and synthetic rubber in October 2014, a 6.3% drop compared to September.

In October 2014, India's natural rubber production fell by 32.56% to 58,000 tonnes compared to 86,000 tonnes in the same period of 2013, as some farmers stopped tapping after prices fell to their lowest level in five years. While natural rubber consumption in the month increased 1.8% to 83,000 tonnes, compared to 81,530 tonnes. Natural rubber imports increased 27.65% to 36,865 tonnes compared to 36,865 tonnes in October 2013.

The benchmark RSS4 grade rubber closed at `.118.50 a kg at Kottayam, while RSS3 grade closed at `.101.65 a kg at Bangkok and Malaysian SMR20 closed at `.95.22 a kg. On National Multi Commodity Exchange November 2014 futures closed at `.118.99 a kg, December at `.116.13 and January 2015 at `.116.41 a kg. On Tokyo Commodity Exchange, November 2014 futures series closed at ¥192.7 a kg, December at ¥196, January 2015 at ¥199.3, February at ¥201.1, March at ¥203.6 and the contract for delivery in April 2015 closed at ¥204.8 a kg.

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

Will rubber rebound or go below Rs.110 a kg?

Japanese based Yokohama Rubber announced start of commercial production at its plant with an investment of over `.300 crore in India at Bahadurgarh-Haryana, which has an installed capacity of 2,000 tyres per day. Indonesian Rubber Association makes a second appeal to its members to impose strict limit on sales until the second quarter of 2015, while Malaysian government has allocated 100 million ringgit to support rubber farmers and a subsidy programme will be activated when the price of SMR20 grade rubber falls to 4.60 ringgit per kg. Thailand, Indonesia and Malaysia are likely to meet on 20-21 November to discuss plans to set prices together and reduce supply. Rubber inventories in warehouses monitored by the Shanghai Futures Exchange rose 1.3% to 173792 tonnes last week.

Ahead of the peak season in India, the rubber prices are likely to remain subdued as tyre manufacturers have already stock-piled for most of the requirements. The Kerala State Co-operative Rubber Marketing Federation Limited has begun procuring RSS-4 and 5 grade rubber directly from farmers by providing `.5 per kg more than the rates fixed by Rubber Board, under the Kerala Government’s rubber procurement scheme. A sub-committee of the panel to formulate National Rubber Policy is meeting in Kochi this week, which among other things would discuss steps to boost domestic demand for rubber and protect farmers from steep fall in rubber prices.

According to Malaysian Rubber Board director general Datuk Dr Salmiah Ahmad, the demand for natural rubber next year is expected to be higher than the supply and natural rubber prices, which are at their five-year low now, are expected to strengthen next year

According to the latest information, the benchmark RSS4 grade rubber closed at `.120 a kg at Kottayam, while RSS3 grade closed at `.101.07 a kg at Bangkok and Malaysian SMR20 closed at `.92.69 a kg. On National Multi Commodity Exchange November 2014 futures closed at `.120.95 a kg, December at `.118.72, and January 2015 at `.119.47 a kg. Tokyo Commodity Exchange, November 2014 futures series closed at ¥189.9 a kg, December at ¥193, January 2015 at ¥195.2, February at ¥198, March at ¥199.9 and the contract for delivery in April 2015 closed at ¥200.8 a kg. On Monday, most probably Tocom futures contract for delivery in April 2015 may trade between ¥198 & ¥204 a kg.

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

Rubber still under pressure

As availability of natural rubber is high, buyers in the global market may not go for it. Rubber is in a bearish mode. The fall in crude oil prices is a major problem. It will make synthetic rubber cheaper. As a result, natural rubber prices will drop and growers will lose interest in nursing their plantations and tapping rubber.

Brent crude fell to a multi-year low after Saudi Arabia lowered the price of oil exported to the United States, while increasing the cost to Asia and Europe. Yesterday WTI closed at US$77.19 a barrel, while Brent crude closed at US$82.82 a barrel.

The European Commission reduced its estimates for euro-zone growth, projecting the 18 Nation region's gross domestic product would climb by 0.8% in 2014 and 1.1% next year, a decline from estimates of 1.2% and 1.7%.

The benchmark RSS4 grade rubber closed at `.120.50 a kg at Kottayam, while RSS3 grade closed at `.104.04 a kg at Bangkok and Malaysian SMR20 closed at `.94.21 a kg. On National Multi Commodity Exchange November 2014 futures closed at `.121.26 a kg, December at `.119.28, and January 2015 at `.119.71 a kg. Tokyo Commodity Exchange, November 2014 futures series closed at ¥190.1 a kg, December at ¥191.8, January 2015 at ¥193.2, February at ¥195.7, March at ¥198.6 and the contract for delivery in April 2015 closed at ¥199.8 a kg. Tommorrow most probably Tocom futures contract for delivery in April 2015 may touch a low of ¥193 a kg.

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