Gloom stalks rubber plantations as price dips to Rs 149

Written by M Sarita Varma | Thiruvananthapuram | Updated: Jan 21 2014, 09:07am hrs
Contrary to expectations, the domestic price of natural rubber (NR) has been nosediving. From R160 per kilo for RSS-4 grade on January 1, rubber growers are alarmed at the price shrinking to R149 per kilo this week.

In Kochi, about 1,200 tonne of sheet rubber changed hands last week. During off-season, the rubber plantations were pinning hopes on a price rally.

Growers and rubber dealers now feel they made a strategic mistake in focussing on getting the import tariff of rubber hiked. "Instead, imports should have been banned altogether for a short while, say three months, Josekutty Antony, president, Rubber Nursery Growers Association, said. "Hiking the import tariff, at a time when demand is crawling and when tyre firms have stocked-up inventories, has not proved particularly effective in perking up prices. Refusal to sell to quotes of very low rates as R145 per kilo has limited the price fall to a certain extent, he added.

Imports, in spite of the raised duties, are still viable since companies have advance licences for duty-free import. Therefore, growers fear that more import is likely to happen in January-March.

Plantations are shadowed by gloom as the growers pin the blame of price collapse on futures trading in rubber. Tyre firms, which constitute 65% of buyers, have been forcing a selling pressure, so the price stays low, Alex Puthenparambil, a planter and rubber dealer told FE.

Rubber growers also attributed the price fall to the active presence of Vietnam, which sells the equivalent grade of Indian RSS-4 sheet for less than $2 per kg .

Physical deliveries on the National Multi-commodity Exchange (NMCE) have been spiralling up, as never before, in all the seven depots of the Central Warehousing Corporation. In December alone, this rubber stock was up by 3,379 tonne. Participants in futures trading have been hedging their purchases in the physical market by taking short positions, in view of market vagaries. They were thus getting stock delivered at the NMCE-prescribed warehouses.

"Demand is likely to be lax for the next few weeks, keeping the price down, since the major buyers seem to have their inventories well stocked," says Anil Mishra, managing director, NMCE.

Till December 31, 264,576 tonne was imported. 30,000 tonne is likely to be imported during January-March, against advance license.

ATMA ( Automative Tyre Manufacturers Association) and AIRIA ( All India Rubber Industries Association) have been maintaining that the price fall was to be expected as global markets were in a depreciating mode. Demand, locally and globally, was weak due to the slowdown.

The rubber consuming industry insists that it is inconsistency in the continued availability of rubber in the domestic market that causes domestic price vagaries.

The industry had been annoyed by the 50% hike in import tariff. Over a total production of 6,27,000 tonne in April-December, the excess availability of just about 2,10,000 tonne is too insignificant to dent prices, AIRIA had claimed.

According to Niraj Thakkar, president, AIRIA, a deeper study on the drop in rubber production is called for. Data released by the Rubber Board in early January admitted to fall in rubber production to the tune of over 5%.

Rubber growers, of which over 70% are in the small farmer category, are also fighting issues like skilled labour shortage.