Rubber4U

Rubber4U - 1st July 2013

Petrol price hiked

All is well at the moment

European Commission President Jose Manuel Barroso announced a political deal on the European Union's hotly contested 2014-2020 trillion-euro budget. Now it has to be seen that these monies are channelled into effective programmes so people across the EU can find jobs.

According to Reserve Bank of India data, India’s current account deficit stood at a historic high of 4.8% of GDP in 2012-13, amid signs that the gap could remain at worrisome levels, despite having halved to 3.6% of GDP during January to March, from the previous quarter’s 6.7%.

Global credit rating agency Moody's said that India's fuel subsidies may reach a whopping `.1.3 lakh crore in 2013-14, surpassing their earlier estimate of `.1 lakh crore from a record high of `.1.6 lakh crore in 2012-13. Indian rupee has depreciated by 11.8% since the beginning of current fiscal year and reached an all-time low of 60.73 against the US dollar on 26th June 2013. If the rupee continues to depreciate and averages 62 against the dollar and crude prices increase to average $108 per barrel for 2013-2014, subsidies could return to Rs. 1.6 lakh crore.

Currently, rubber is heading towards north and can expect a positive outlook tomorrow.

Is rubber loosing the ground?

Crude oil prices are struggling to gain significant ground but have managed to pick up in the initial stage of trading as U.S data stoked optimism that recovery in the world’s largest economy is picking up, boosting the dollar and raising the appeal of futures denominated in yen. The contract for delivery in December on the Tokyo Commodity Exchange climbed to as high as ¥235 a kg and closed at ¥227.2 a kg, after touching a low of ¥226.5 a kg. It seems that rubber is heading towards a price tag of ¥200 a kg, but tommorrow the market will be in green.

The Malaysian rubber market finished lower, due to lack of buying interest from major consumers. China consuming 3.85 million tonnes last year, representing 34% of global demand, had stopped importing natural rubber and was consuming locally produced rubber to reduce its stockpile. 

In the domestic market, supply of natural rubber is extremely tight, growers are not releasing stocks as they are expecting higher price and hence it is holding the fort at `.175.50 a kg.

Rubber losing all the initial gains

The Federal Reserve's signal that the era of cheap central bank money was coming to an end. Plans by the U.S central bank to scale back its money printing combined with fears that China's policy may be tightening to lift the dollar has raised fears of prolonged market shakeout, while commodities extended last week's losses.

Rubber declined, heading for a fifth monthly loss, amid concern that demand may weaken from the world’s largest consumer. Rubber grade RSS4 trading flat in the local market and in the spot market on NMCE, the grade was little changed as investors await fresh triggers for further directional moves. TOCOM rubber futures erased all the initial gains while SHFE and AFET rubber futures dropped. In May, natural rubber production in India rose 1.7% to 59000 tonnes, while consumption dropped 3.1% to 83000 tonnes. Imports slumped 17% to 17334 tonnes.

The Indian rupee hit an all-time low against the US dollar and it is going to impact the industries and the common man very badly. Crude oil accounts for a major share of India's import bill, which will become more costly, due to falling rupee. The additional burden of importing crude oil will be transferred to the consumers and in turn transportation charges will increase. Manufacturers would also revise their prices upwards to match their profit margins.

Rubber futures in Tokyo swung between gains and losses as Japan’s currency weakened against the dollar on prospects the Federal Reserve will signal the fate of U.S monetary stimulus. The contract for delivery in November on the Tokyo Commodity Exchange was down at ¥231.6 a kg.  RSS3 grade closed at `.163.89 a kg at Bangkok, while Malaysian SMR20 closed at `.133.18 a kg. Indian RSS4 grade rubber closed at `.175.50 a kg at Kottayam, while on the National Multi Commodity Exchange July futures were trading at `.173.15, August at `.169, September at `.165.19, October at `.162.06 and November at `.166.38 a kg., at 3.30 pm IST.

Oil in New York traded nears a nine-month high after an industry report showed U.S stockpiles dropped. Higher oil prices boost the cost of making synthetic rubber.

Tight domestic supply may increase import

The rupee fell to a new low against the U.S dollar because of U.S Federal Reserve suggestions -will soon taper bond buying. There have been buyers from India recently to buy natural rubber, but bids from Indian buyers are low because the weak rupee.

Supply of natural rubber is extremely tight in the domestic markets as there has been no rubber tapping in Kerala for more than two weeks because of monsoon rains. Consuming sector has been forced to look overseas for supply. Growers are not releasing stocks as they are expecting price rise, due to which there is a possibility that rubber imports by India may rise and according to an estimate by Association of Natural Rubber Producing Countries, India will import 183,000 tonnes this year.

Today, prices of Indian RSS4 grade rubber closed at `.175.50 a kg at Kottayam, while on the National Multi Commodity Exchange July futures were trading at `.172.73, August at `.168.55, September at `.165.52 and October at `.162.50 a kg., at 4.00 pm IST.

Rupee trembles

The domestic unit plunged 130 paise to hit a life-time low of 60 against the US dollar in early trade against the previous close of 58.71 at the Interbank Foreign Exchange market. The currency also continues to face challenges from India’s rising current account deficit. The weakening currencies come at a tricky time for Asian economies, as countries face an uncertain growth outlook compounded by inflationary pressures.

Today, prices of RSS3 closed at `.164.95 a kg at Bangkok, while Malaysian SMR20 closed at `.134.50 a kg. On the Tokyo Commodity Exchange, June futures series closed at ¥229, July at ¥232, August at ¥232.3, September at ¥234.3, October at ¥236.1 and the contract for delivery in November closed at ¥238 a kg, after touching a low of ¥235.2 a kg.