• PAGE ONE
• INDEX
• HOME

Will the recovery sustain?

AFTER a prolonged period of a depressed price trend, there appears to be some relief to natural rubber growers as the price has ruled firm in the recent weeks.

After moving closer to the Rs 3,500 per quintal mark, the price of natural rubber has eased to the present level of Rs 3,375 per quintal.

The onset of the monsoon season in Kerala, the key rubber-producing State, has been the key factor behind the firm trend in prices. June and July are typically slack production period for natural rubber owing to the monsoon rain.

Apart from the dry-up in supply, the increase in tyre production in the recent months has also played a part in fuelling demand for natural rubber. This, in turn, played a part in imparting firm trend in rubber price.

On the fundamental side, as per the Rubber Board's statistics, the country had a carryover stock of 1.84 lakh tonnes at the end of March 2001, which left a surplus of 79,000 tonnes. At 6.31 lakh tonnes, rubber consumption grew a modest 0.5 per cent durin g 2000-01.

At the global level, prices are expected to recover in the next couple of years. Reports indicate the price at the global level would firm up by around 30 per cent during the next two years. This, however, would hinge on the automotive tyre industry, the principal user of natural rubber.

According to the International Rubber Study Group, Thailand, Malaysia and Indonesia, the three largest natural rubber-producing countries, are likely to sign a declaration to set a minimum selling price for rubber. Reports also indicate that the stocks a t the global level is likely to touch an all-time low, while global consumption is slated to grow faster than expected previously.

Domestically, official estimates indicate that the production in the current year is expected to grow at around two per cent while the consumption is slated to increase by about three per cent.

However, a revival in automobile sector and a recovery in industrial production would be the key requirement to trigger an increase in consumption. Though the tyre production has shown signs of recovery over the recent months, it remains to be seen wheth er the trend would continue in the remaining part of the current fiscal.

Going ahead, there is some early indication of a firm trend in rubber prices. An improvement in demand from tyre sector would help the rubber prices settle at higher levels. Globally too, there are indications of a recovery in demand and price trend. Whi le rubber growers could keep their fingers crossed, tyre producers could have to contend with a slight strain in profit margin.-- BL Research Bureau