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| Natural rubber prices hit peak on low supply |
| George Joseph / Kochi Mar 03, 2010, 00:34 IST |
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 Natural rubber (NR) market is currently in a buoyant mood, as prices across the globe are ruling at an all-time high. Taking cues from the global market, the price of RSS-4 grade in the local market also touched an all-time high of Rs 143 a kg on Monday.
Singapore market today quoted NR at Rs 149.75 a kg. The local market also surpassed the earlier record price of Rs 142 quoted on February 22.
The market is likely to remain bullish, as the supply will be short due to lower production in 2009, according to the latest estimates of the Association of Natural Rubber Producing Countries (ANRPC).
According to Djoko Said Damarjati, secretary general of ANRPC, the NR industry is currently facing a tight supply situation, caused by a progressive decline in production, coupled with a marked rebound in demand. Moreover, February-April being a lean season in terms of natural rubber production won’t be able to help the situation.
Fundamentals are favourable for NR prices to stay bullish. At present, none of the natural rubber producing countries holds any buffer stock. Therefore, apprehensions centered on a non-existing buffer stock of 300,000 tonnes were totally baseless, said Damarjati.
The recent increase in the prices of crude oil will impact the cost of production of synthetic rubber in the country. The Budget 2010 had re-imposed the 5 per cent duty on the import of crude oil and enhanced the excise duty on petrol and diesel. Any increase in the price of synthetic rubber will naturally shift the consumption to natural rubber, which will further add pressure on its prices.
According to the latest data released by ANRPC, there was a fall in the supply of NR in 2009. The supply was down to 8.69 million tonnes in 2009, against 9.15 million tonnes during the previous year, registering a drop of 5.1 per cent.
This was mainly due to the adverse climate in the NR-producing countries. Though the area of cultivation rose to 7.125 million hectares from 7.019 million hectares in 2008, there had been a severe fall in average yield. The per hectare average production dropped to 1,219 kg in 2009 from 1,304 kg during the previous year.
Except Cambodia, China, Sri Lanka and Vietnam, all the NR-producing nations had suffered a fall in production. Thailand, the world’s largest producer of NR, suffered a drop of 6.1 per cent in production last year, while Malaysia posted the sharpest drop of 22.1 per cent. The overall world production of NR dropped 5.1 per cent, according to ANRPC.
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