Surge in rubber prices continues; gap with global rates widens

The local mart is higher by Rs 40/kg than in the international market

The gap between local and global prices of natural rubber (NR) has risen to one of the highest in the past four years. The local mart is now higher by Rs 40/kg than in the international market.

Local prices were moving close to the international counters during 2012; these were even lower in January-April. However, in calendar 2013, irrespective of the price movement abroad, the Indian market is moving on its own. And, has risen substantially in the past five weeks.

Which is in marked contrast to major global markets, such as in Tokyo and Bangkok; there, prices have been dipping almost daily over the past four to five weeks. On Tuesday, for instance, the Indian price is Rs 192 a kg; Bangkok quoted Rs 152 a kg. There is a lack of demand abroad; India faces a shortage of supply, as reported earlier in this newspaper.

In fact, despite the Rubber Board saying the current quote is Rs 192 a kg, the commodity isn't to be had in Kottayam and Kochi (from Kerala comes 90 per cent of India's NR output) even at Rs 195 a kg. Saying it is rare for Indian prices to be more than Rs 15-20 a kg above global prices, non-economic factors are at play (meaning hoarding and speculation), Rajiv Budhraja, director-general of the Automotive Tyre Manufacturers Association. Benchmark rubber contracts on the Tokyo Commodity Exchange for future delivery have dropped a little over 20 per cent this year so far; the trend continues. Weak demand across the globe is expected to remain for the rest of the year.

China's import of NR, for instance, dipped 18.8 per cent to 130,000 tonnes in June from the year before. Synthetic rubber import fell 3.7 per cent.

Tyre grade rubber is, in fact, at its weakest level since 2009 as concerns about global economic growth and uncertainty over demand sparked selling in the benchmark rubber futures on Tocom.

Budhraja told Business Standard the government should allow duty-free import; else, rubber-based units would be in serious trouble. He said Atma would be pressing the issue with the Union government. Proponents of this view say crumb rubber, as good as the local RSS-4 benchmark grade, is available abroad even at Rs 130/kg. Thailand, the world's biggest rubber producer and exporter, is asking Malaysia and Indonesia, the other majors, to help prop up the export price, down by a fifth since its peak this year.