Natural rubber prices plunge to Rs 160 a kg

Price dropped 10% in just three weeks time as market quoted Rs 177, on last week of last month

The natural rubber market has seen the bench-mark RSS-4 grade crashing to Rs 160 a kg on Tuesday, the lowest price since February. Prices should have been rising because of the steep fall in production this year. However, prices have been falling due to a demand crunch, coupled with a sharp rise in imports.

Rubber prices have dropped almost 10 per cent in  about three weeks from Rs 177 a kg in the last week of September. Compared with the average price in July, Rs 192 a kg, the fall is 17 per cent.

Growers ascribe the current fall to imports. They said   when imported rubber is freely available, the industry not keen on buying from local markets. According to market sources, the price could crash further to Rs 158 a kg because supply is expected to go up during the October-January period. This is the main production season for natural rubber, with an average monthly output of 100,000 tonnes.

With a good season up ahead, buyers see no urgency in purchasing rubber, hence the fall in prices, said N Radhakrishnan, a leading stockist and former president of Cochin Rubber Merchants Association.

Meanwhile, Rubber Board chairman Sheela Thomas said that total annual production would drop 9.4 per cent in this financial year due to heavy monsoon and leaf-fall disease. According to her, annual output in FY14 will be 870,000 tonnes against 960,000 tonnes recorded in the last financial year.

This loss would offset in the next financial year as the tapping area is likely to go up to 518,000 hectares from 504,000 hectares in FY13. According to the Board’s estimates, stock is 230,000 tonnes, as on September 30. Growers said rubber-based units have not been actively taking rubber for the past couple of weeks. This adds to the market’s woes.

On account of the price advantage in the global market, import shot up a whopping 208 per cent in September at 45,581 tonnes, according to the Rubber Board’s latest data. This is the highest ever monthly import to the country. Based on this, cumulative import during the April-September period increased to 179,292 tonnes, against 112,641 tonnes during the same period of the last financial year, recording a growth of 59 per cent.

The high levels of import is because of the lower price tags in Bangkok market (Rs 157 a kg on Tuesday). The gap between local and global market was wide until September as global prices were lower by Rs 15 a kg than India. The gap is narrowing now. Standard Malaysian Rubber (SMR-20), used by tyre makers, is sold at Rs 144 a kg. Moreover, Thailand, the world’s largest exporter had exempted rubber from export cess for four months starting from September. Therefore, import is still a viable route for rubber-based industries, especially tyre manufacturers.

During the April-September period, production dropped 13.3 per cent at 343,000 tonnes against 395,700 tonnes in the year-ago period. However, there was a setback on local consumption as well with a 2.7 per cent drop during April-September. As much as 489,015 tonnes were consumed during the period against 502,330 tonnes in the same period of the last financial year. This is due to the drop in automobile sales in India.

Meanwhile, the Left Democratic Front, Kerala’s opposition, has urged the Centre to drop the import incentives immediately to save the state’s one-million plus rubber growers. Allies in the ruling United Democratic Front, especially the Kerala Congress, too, are on a war path against the fall in rubber prices.