Rubber likely to fall on duty cut expectations

Written by Reuters | Mumbai | Updated: Sep 1 2010, 04:35am hrs
Indian rubber prices are likely to fall for a third straight week on heightened expectations for a cut in import duty on the commodity, which may cut demand for the local produce, traders and analysts said on Monday.

Favourable weather in key growing areas has also boosted supplies, weighing further on prices, they added. Supply situation is improving...in case government cuts rubber import duty, we can see further downside by around 4-5%, a member of The Indian Rubber Dealers Federation, said. India will decide on the tyre industry's demand to reduce the tax on rubber imports in a week, a senior government official said on Thursday, with prices up nearly 70% in the past year.

Importers of natural rubber now pay the government a 20% tax.

The spot price of the most traded RSS-4 rubber (ribbed smoked sheet) fell Rs 100 to Rs 17,000 per 100 kg on Monday at Kottayam market in Kerala, Rubber Board data showed. The price has fallen 7.6% in August.

The benchmark September contract on the National Multi-Commodity Exchange (NMCE) provisionally closed 0.2% down at Rs 16,817 per 100 kg on Monday.

The weakness will be limited by good demand from tyremakers and other industries, some traders said. I am not expecting sharp fall. We are getting a lot of inquiries from tyre makers, said MK Abraham, a traders based in Kerala.

A boom in the auto industry has bouyed demand for tyres, pushing up buying in the rubber market by tyre-makers. India is likely to import 110,000 tonne of natural rubber in 2010-11, higher than the Rubber Board's April estimate of 70,000 tonne, as record-high local prices forced tyre makers to source more raw material from abroad, a Rubber Board official said earlier this month.

India's rubber output rose 14.4% to 57,500 tonne in July as farmers increased tapping due to record high prices, a senior Rubber Board official said.