Subdued demand, surplus stock may trim rubber price

Written by RajeshRavi | Kochi | Updated: Dec 2 2012, 04:56am hrs
Natural rubber prices could remain weak in coming months on account of good stocks with major rubber-producing countries and subdued demand, says an econometric study by the Agricultural Market Intelligence Centre (AMIC) of Kerala Agricultural University. AMIC forecasts that the RSS 4 grade rubber at Kottayam would remain in the price range of R168-173 per kg till February.

Price would remain subdued in the short run on account of weak demand, economic slowdown, widening gap between domestic and global prices, operation of the downward price cycle, more dependence on imports, growing inventory levels and soft crude oil prices, K Satheesh Babu of AMIC said. Domestic spot price of rubber is out priced compared to the international price, compelling the corporate houses to resort to large scale import. There are unconfirmed reports that the imported rubber would constitute nearly one-fourth of the net consumption of natural rubber in India during the FY 2013, he added.

According to the state-run Rubber Board data, India's natural rubber imports in September rose nearly 16% on the year to 14,779 tonne. Rubber production in India peaks during October-January and starts falling from February. India is likely to produce 942,000 tonne of natural rubber in the current year, up from 899,400 tonne a year earlier and consumption may exceed one million tonne, industry sources said.

Regarding global NR production, Sateesh said that the Association of Natural Rubber Producing Countries (ANRPC) estimates production during the current year could be higher by 5.13 % over the last year at 108.6 lakh tonne. Vietnam has been a surprise factor and could end up with 9.55 lakh tonne of production and emerge as the third major producer. "The build up of inventory due to the decision of the Tripartite Rubber Council (comprising of Thailand, Indonesia and Malaysia) to impose a production and export cut in NR production from October 1, 2012, to March 2013 proved not only ineffective, but provided ample room for non-member countries like Vietnam to take advantage of the situation. The huge stock that has accumulated as a result would prove counterproductive, and would add pressure on rubber prices in the coming days,"he added.

Sateesh said that the automobile sector has been the major casualty of the global economic slow down. Indian passenger car sales were lower in October by a record margin and this could affect demand sentiments, he said.