Financial Daily from THE HINDU group of publications
Saturday, Jun 12, 2004
Agri-Biz & Commodities
Rubber flares up as monsoon hits tapping
Vipin V. Nair
Kochi , June 11
RUBBER growers have never had it so good in the past eight years as prices continued to rule high at Rs 60-plus levels, but major rubber consumers such as tyre makers fear a severe impact on their profitability due to the price rise.
The RSS-4 grade closed at Rs 61.50 per kg and RSS-5 grade at Rs 60.25 kg at the Kochi market on Friday - 50 paise more than Thursday's price.
"There is shortage for sheet rubber in the market because tapping has been affected by continuous rains. I don't think anybody is hoarding the stock now as the current price is very attractive for the growers," a rubber industry official told Business Line.
A dealer in Kottyam said there was severe shortage of RSS-4 grade in the market. "There are buyers ready to take the stock at Rs 62 per kg, but there is no stock," he said.
Since the monsoon started early this year in May instead of June, most of the growers could not do rain-guarding. "I didn't get even one week for the putting the rain guards this year because of the early monsoon," says Prof Paul Mathew, who has a 10-acre plantation.
The rise in rubber prices would hit profitability of tyre makers as they had not gone for any major price hike of tyres, said Mr D. Ravindran, Director-General of Automotive Tyre Manufacturers Association (ATMA).
The tyre industry consumes 3.50 lakh tonnes of rubber every year. The price of RSS-4 grade rubber a year ago was Rs 49.10 per kg. "A ten rupee increase in price means an additional expense of Rs 350 crore for the industry," Mr Ravindran said.
He said most of the tyre makers had already contracted for rubber in view of the shortage during monsoon. "For consumption during April to August, the companies have contracted for 26,500 tonnes," he said.
Most of the tyre companies had rubber stock available for 21-30 days now, as against the normal stock position for 15 days, the ATMA official said. Tyre companies have taken a cautious approach towards procurement these days.
If the monsoon continues unabated, prices could rise further, many dealers said. "I won't be surprised if the price reaches Rs 63-Rs 64 (a kg)," one dealer said.
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