Global natural rubber price nosedives to Rs 95/kg

Bangkok records the lowest price since 2007

Natural rubber (NR) prices nosedived in various global markets today on account of poor demand from countries like China and oversupply of the commodity.

Bangkok market today quoted Rs 95/Kg for bench mark grade RSS-4 while Tokyo Commodity Exchange (TOCOM) recorded a crash ranging from 5.7 to 8% in various contracts.

This is for the first time in last seven years, Bangkok records a price below Rs 100 mark. On last Friday, Bangkok had a price tag of Rs 100/Kg. On this day, last year the price was Rs 160/Kg, there.

Price of Standard Malaysian Rubber (SMR) had poorer performance as its price is now Rs 88 only. Compared to this India is rather better positioned as RSS-4 gets Rs 121/Kg in top Kottayam market. The local price dropped Rs 4/Kg in this week itself.

According to experts this steep fall in price is due to the poor off take by China, world's largest consumer and by the European nations. The ongoing economic slow down in China favours a sluggish demand while the drop in the price of synthetic rubber (SR) attracts European consumers.

There is a definite hike in the demand for synthetic rubber in the western world which affects the demand for NR, said an international expert. He said that the price of rubber is likely to be on a lower strata till 2018 and a slight improvement might be seen by 2018 only.

The global price is likely to be hovering around $ 1.5/Kg for the next three years, he added. According to him this is because of the shift from natural rubber to synthetic rubber as more research is going on in SR on quality front. This naturally affects the demand for NR, where research on quality is rather weak.

Last week, Thai government has approved $931 million in soft loans for cooperatives and companies to use to buy rubber from farmers as a way of propping up prices. But, demand is slack at the moment because of a slowing Chinese economy and lack lustre growth in the developed world.

Meanwhile, there are reports that tyre companies from China purchased rubber last week following a drop in inventories. However, this slight pick-up in demand from top consumer China was not really taken as a sign of recovery in a market burdened by oversupply and confusion surrounding the sale of 200,000 tones of Thai rubber from state stockpiles.

Inventories in the bonded warehouses in Qingdao, in China, were estimated to have fallen to 192,200 tones, according to dealers, from 362,200 tones in mid-May and around 341,000 tones in June last year.

Tokyo rubber futures, a global benchmark, have fallen more than 30 percent this year due to concern about demand and economic growth in China.

Bangkok market today quoted lower as price for RSS-4 grade drops to Rs 98/Kg, while Standard Malaysian Rubber (SMR) quoted only Rs 91/Kg. This trend indicates the poor off take by major consuming countries, hence a low price regime can be expected in future also, said a top Kochi based dealer.

Cut down production

Meanwhile, Dr Hidde P Smit, former secretary general of International Rubber Study Group (IRSD) and rubber market analyst, suggested tree-felling and reduced tapping in order slow falling rubber prices.

Delivering the key-note address at the sixth edition of India Rubber Summit here he predicted that the low price regime could continue for the rest of the decade and even beyond.

He said any intensive rubber planting done now could lead to a glut in natural rubber market after six years, bringing the prices down further.

He added that world NR consumption is expected to touch 18.6 million tonnes by 2025, while NR supply may exceed demand at 19.3 million tonnes by 2025 and 20.2 million tonnes by 2030.

However, Indian market representatives disagreed, pointing to the Indian example and suggesting the rising supply deficit could be bridged only by boosting production.