Financial Daily from THE HINDU group of publications
Saturday, Dec 24, 2005
Agri-Biz & Commodities
Rubber prices stretch past Rs 70/kg-mark March futures price tops Rs 75
Vipin V. Nair
Kochi , Dec 23
NATURAL rubber on Friday soared to its highest-ever price in the domestic market as the benchmark RSS-4 grade closed at Rs 70.50 a kg amid concerns that the opening stock of 2006-07 may well plunge to the lowest level in recent years.
The previous record for the ribbed smoked sheet (RSS) - 4 grade was Rs 70 a kg, which occurred thrice during the current financial year.
"This is the highest ever price," said Prof K.K. Abraham of Pala Marketing Society, a leading co-operative engaged in rubber trading. "Trading did take place at this price today," said Mr N. Radhakrishnan of Cochin Rubber Merchants Association.
Worldwide, natural rubber prices have been ruling at record high levels in the past couple of months. The present flare-up of prices is attributed to floods in Thailand that has considerably affected production in that country.
The RSS-4 is higher by Rs 17.25 a kg as compared with the price on December 23 last year, Rubber Board statistics show. Such a steep year-on-year difference is also rare.
The record price was hit when production picked up this week, after months of low yield due to heavy and untimely rains in Kerala, which produces over 90 per cent of the country's annual output of 7.50 lakh tonnes natural rubber.
Lower opening stock feared: The rubber trade here fears that the opening stock for fiscal 2006-07 may be the lowest in the past seven years on account of lower than expected production and imports; and higher consumption and exports.
"We think the opening stock of the new fiscal year could well be only around 70,000 tonnes," said Mr Radhakrishan.
The opening stock for the current fiscal was about 1,07,000 tonnes.
Production till October this year was 4,22,090 tonnes, while consumption was 4,63,845 tonnes.
The association expects production during November-March 2006 to be 3.55 lakh tonnes, taking the total annual production at 7.77 lakh tonnes. This is a tad lower than the Rubber Board's projection of 7.80 lakh tonnes.
On the other hand, going by the healthy growth of tyre industry, consumption is expected to be 7.92 lakh tonnes during the year. What will aggravate the stock position would be the lower than projected imports in the year at about 42,000 tonnes and an unexpected surge in exports to 65,000 tonnes.
If this forecast proves right, the new fiscal will only have an opening stock of around 70,000 tonnes.
The tyre industry had earlier forecast imports of around 70,000 tonnes but higher international prices nixed this plan. Exports, however, picked up because of the same reason as against the conservative estimates of 45,000 tonnes by the Rubber Board for the year.
As on December 21, exports stood at 47,109 tonnes and imports at 40,984 tonnes.
But tyre industry sources say that companies would import more quantities in the coming months as block rubber prices have eased a bit in international markets.
The anticipated supply constraint is also forcing tyre companies to look at the option of imports in the coming days.
Our Correspondent reports from Kottayam: In the domestic spot market, the sentiments appeared extremely bullish as covering groups and purchase agents continued to chase the narrow arrivals.
Most of the growers and dealers were reported to be holding stocks expecting the market to seek new horizons.
Sources indicated that the players are expecting a medium term target of Rs 75-80 per kg for sheet rubber.
The rubber futures followed suit on NMCE with January contract trading at Rs 72.20 (Rs 71.50), February at Rs 73.90 (Rs 73.29), March at Rs 75.20 (Rs 74.40) and April at Rs 76.20 (Rs 75.78) per kg for RSS 4. RSS 3 closed flat at Rs 76.67 a kg at Bangkok.
Spot rubber prices a kg were: RSS-4: Rs 70.50 (Rs 69.75); RSS-5: Rs 68.50 (Rs 68); ungraded: Rs 67 (Rs 66.50); ISNR 20: Rs 68.75 (Rs 68.25); and latex 60%: Rs 49 (Rs 48).
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