Rubber growers clamour to shut import window as price plunges

Written by M Sarita Varma | Thiruvananthapuram | Updated: Oct 25 2013, 09:03am hrs
The collapse of the natural rubber (NR) market is taking a pre-election political swing in the plantation heartlands of Kerala, as the price of the bellwether RSS-4 grade fell to R159 per kg on Thursday. Thinning offtake by consumer industries like tyre giants and the phenomenal surge in imports have been sitting heavy on the NR price. The price of RSS-4 grade had been R192 per kg as recently as July. Prices have fallen by 17%.

"What is alarming is that it has happened when production is relatively low and when the price should be spontaneously shooting up," Siby Monipally, general secretary, Indian Rubber Growers Association, told FE. "Unless the NR import incentives are frozen for a while, there cannot be any price recovery," he said.

IRGA has been pressing the Centre to drop the sops for zero-duty imports for six months. The Left parties and Kerala Congress, an influential ally of Congress-lead UDF front, have started agitations, seeking the Centre's urgent market intervention.

NR imports are viable only when the landed price of imported rubber is at least R6 per kg lower than the Indian price. In the last month, this window of opportunity was very wide, with the Bangkok market lower to Indian price by R15 per kg. Seizing this opportunity, imports had shot up by 208% in September at 45,581 tonne. According to the Rubber Board statistics, the cumulative import during the April-September period had zoomed to 179,292 tonne, compared to 112,641 tonne during the same period of the last financial. This shows an increase to the tune of nearly 60%.

Although the price differential is not quite as wide in the last few weeks, the price quoted in Bangkok and Singapore still stays decidedly lower than the domestic price at R156 per kg for SMR-20 (Standard Malaysian Rubber), the counterpart of RSS-4.

A more recent worry for the Indian rubber growers is that Thailand has dropped export cess on rubber for four months, starting September.

Rubber Board chairman Sheela Thomas agrees that at a time of relatively lower production, NR price would have perked up. "We estimate that total annual production would drop 9.4% in this financial year. Compared to 960,000 tonne in the last financial year, the annual output in FY14 will be 870,000 tonne. This is due to unprecedented monsoon rain and leaf-fall disease," she said.

As on September 30, the stock, according to the Rubber Board, is 230,000 tonne.

Stockists say there is a disturbing shopping lethargy from the side of the consuming industry. "There is little haste to boost inventory, though the tyre industry claims huge expansion plans. This has created some panic among growers," said N Radhakrishnan, former president of Cochin Rubber Dealers' Association.

In the April-September period, local consumption had dropped by 2.7%. Only 489,015 tonne were consumed, compared to 502,330 tonne consumed in the previous year. This was due to the lull in automobile sales in India. However, demand is looking up in the automobile sector and correspondingly the tyre industry in the current season. Zero-duty import facility for NR is evidently seen as the villain as this demand surge is conspicuously missing in the rubber plantations alone.