After plunging 48% in 2014, the crude oil price
has fallen another 36% since the end of last year. Rubber product makers and
exporters may continue to see growth as natural rubber prices may continue to
stay low because of low crude oil prices.
Global demand for natural rubber is slowing
as the economy cools in China. Supplies are expanding after a decade-long rally
in rubber prices to a record in 2011 encouraged top producers like Thailand,
Indonesia and Vietnam to plant more trees. Output will exceed use for two more
years, with the surplus quadrupling in 2016. Global production is set to exceed
demand by 411,000 tonnes next year and by 430,000 tonnes in 2017, compared with
a surplus of 98,000 tonnes in 2015, according to The Rubber Economist Ltd., a
London based industry researcher.
Rubber traded in Tokyo has tumbled 71% from a
record in 2011, touching a six-year low of ¥153 a kg on 6th November 2015. Tokyo
rubber prices climbed more than 14% to 174.8 yen at the beginning of December
from a six-year low of ¥153 a kg. The Tokyo Commodity Exchange rubber dropped
to a one-month low on 29th December, stretching its losses into a fourth
consecutive session, as slowing demand from top consumer China and weakness in
crude oil.
Crude oil prices still remained under
pressure on fears of slowing demand added to worries over near-record global
production levels. Natural rubber prices often follow moves in crude oil as the
commodity competes with synthetic rubber and the market is concerned about
slowing economic growth in China.
United Planters Association of Southern India
(UPASI) has said cheap imports are harming the rubber industry. It wants the
government to introduce safeguards to protect domestic players. "With
damage to domestic industry being evident, government should play its role as
regulator and introduce safeguards to limit imports. The recommendations of the
Parliamentary Standing Committee on the rubber industry in India have clearly
stated that uncontrolled imports are harming the growing domestic
industry," said Dharmaraj, president of UPASI.
The benchmark RSS4 grade rubber closed at `.102.50
a kg at Kottayam, while RSS3 grade closed at `.79.94 a kg at
Bangkok and Malaysian SMR20 closed at `.75.60 a kg. On
National Multi Commodity Exchange January 2016 futures closed at `.103.91
a kg, February at `.105.70 and March closed at `.108.04
a kg. On Tokyo Commodity Exchange, January 2016 futures series closed at ¥147.3
a kg, February at ¥149.9, March at ¥153.1, April at ¥166.6, May at ¥157.7 and
the contract for delivery in June 2016 closed at ¥159 a kg. It is definitely
going to be an interesting year in 2016 in terms of the economy and financial
markets.
To read Rubber4U – 1st
January 2016 issue: http://rubber4u.com/Public/Abcd.pdf
for latest forecast
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