Global financial crisis to hit natural rubber hard: Experts

The natural rubber (NR) market is in a crashing mode as economic recession engulfs European, US and Asian economies. Price of benchmark grade RSS-4 on Thursday dropped to Rs 134 a kg from Rs 141 recorded during the last week. Likewise, the price of RSS-5 dropped to Rs 128 and that of ISNR-20 decreased to Rs 126 from Rs 130 last weekend.

The crash would be much sharper in the coming days, according to prominent Kochi-based dealers, as a slowdown in the demand for the commodity is expected. The huge crash in the price of crude oil is directly linked with the drop in prices of NR as appreciation in the value of crude in turn makes synthetic rubber (SR) dearer. This was the major reason for the bull phase in the NR market the world over for the last six-to-seven months.

The domestic market is in panic as there are serious apprehensions over the future of the commodity in an era of economic slowdown. According to leading traders, the NR market is poised for a bear phase, thanks to various global and domestic factors.

The main production season in India will be in by next month and arrivals will be at its peak during the October-January period. Almost 50 per cent of India’s total annual production of over 800,000 tonnes is made during this four-month period. If supply shoots up to its maximum and the market is on a bear mode, the commodity is likely to be in a serious crisis, they say.

There is panic selling in the market for the last three-to-four days and growers are in a mood to relinquish the stock as early as possible. Supply of the commodity has increased sharply in the last couple of days. According to experts, NR would be a serious casualty of the current global economic situation.

If global financial crisis gallops and spreads further, and the crude oil market slashes, the most affected agricultural commodity will be natural rubber, they say.