Japan tsunami pulls down rubber prices

Written by M Sarita Varma | Thiruvananthapuram | Updated: Mar 17 2011, 05:16am hrs
The impact of devastating earthquake and tsunami in Japan has started spreading into the Indian rubber industry. On the spot market, price of export-grade RSS-4 (ribbed smoked sheet) rubber has declined by R30 per kg during the last two days, bringing unexpected relief to tyre companies.

From its price zenith of R240 per kg last month, Monday's market has pummelled down the RSS-4 price to R185 per kg. Stockists, who were putting together the end-of-the- season sheets, did not anticipate the decline prices.

On Tuesday, there has been no recovery from R185 per kg. But, there is more buyer interest, says dealers, signifying that tyre companies have warmed up to new market options.

Japan's Tokyo Commodity Exchange (Tocom) is one of the biggest bourses in rubber futures. From 551 yen, Tocom price for RSS-4 has fallen to 380 yen.

Rubber growers shared apprehensions that the post-tsunami standstill in Japan's industrial sector and automobile sector could leave further after-quakes in the rubber price.

We are keeping fingers crossed that the bearishness is a short-term phenomenon. But, if the price continues to fall to further depths, it will be a major concern, Siby Monipalli, general secretary, Indian Rubber Growers Association (IRGA) told FE. A meeting of IRGA will be convened the soonest to study the market situation.

Reports are that in Japan, the factories of two automobile giants Honda and Nissan, have ground to a halt. On the flip side, Toyota and Hino Motors expect to be back to business as usual from March 18.

Conventionally, during off-season (March, April and May) Indian tyre firms tend to build buffer stocks in rubber, anticipating about 3000 tonne consumption per day. Association of Natural Rubber Producing Countries (ANRPC) had forecast about 5% more rubber demand in India and 9% in China for the current year.

Although the deadline for importing rubber at 7% slashed-duty rate is close at March 31, tyre companies were not too bullish about using this import option as the landed cost would add upto R200 per kg. It is into this bleak scenario for tyre firms that the price of R185 per kilo comes in as a sudden tsunami bonanza.

However, ATMA is not uncorking any champagne yet. Kaushik Roy, Convenor Purchase Group Automotive Tyre Manufacturers Association (ATMA) said, when contacted, that it wastoo early to comment. The fall in prices is primarily linked to the crisis in Japan. Roy sought more time to judge the situation. Sources in ATMA hinted that this development may slowdown the decision on proposed hike in tyre prices.

Rubber growers and tyre industry are equally watchful of the fall in industrial demand in China.