Demand swing revives prices

IN FOCUS/ RUBBER

Natural rubber prices were likely to remain bullish in the next few weeks, traders said here today.

Export demand has suddenly revived and so has the post-monsson seasonal demand from Indian rubber-using industry segments.

Traders said in September alone, exports were likely to be in the region of 12,000 tonnes against 7,000 tonne per month in July and August of this year.

As the global price of rubber was currently ruling above prices in the Indian market, traders were conentrating on export deals rather than domestic deals. Overseas buyers were also eager to strike bargains.

The highest demand overseas was for the ISNR-20 grade, traders pointed out.

The global price for the RSS-3 grade was around Rs 57.50-57.75 per kg while the corresponding Indian grade of RSS-4 was selling at Rs 52/kg, they said. This price difference had made Indian rubber competitive in the world market.

Traders said demand within the country had also revived as rubber user industries, especially the tyre industry, had stepped up production after the monsoons.

Demand from domestic rubber goods manufacurers was around 62,000 tonnes per month and this demand coupled coupled with export demand would be adequate to sustain rubber growers even through the peak production season of October 20004 to January 2005, said traders.

In tune with the spot market, prices in futures trading had started to rise as well, online traders said. October contracts were done on September 29 at Rs 54.40/kg, while November deals were at Rs 54.70, December contracts at Rs 54.70 and deals for January 2005 at Rs 55.70/kg., traders pointed out.

The increase in rubber production and supply would lead to some selling pressure in the market by end-October and this was likely to check any further rise in prices till the production season ended, said sources.

The rubber crop was likely to be ay least 6 per cent larger than the crop size in the last production season of October 2003 to January 2004, when the yield was 3,20,000 tonnes.

Good monsoon rains and better price realisation would lead to improved flow of sap from trees and increased tapping by growers this season, traders indicated.

The development of the past week was in sharp contrast to the slump in natural rubber prices when it nosedived below Rs 50/kg and experts had warned of a further fall in prices. Till the first week of the month, both domestic demand and export enquiries were few and far between.

The RSS 4 grade was going at Rs 49/kg after peaking at Rs 67/kg in mid-July. Rubber growers then were in a state of panic ahead of the main production season as they feared prices would crash further.

Traders put the carry-over stock in the market at around 25,000 tonnes every month upto January 2005.

However, rubber exporters said they were still upset that the central government had slashed the export incentive by 50 per cent.

N Radhakrishnan, president of Cochin Rubber Merchants Association, told Business Standard that the stock position would be the crucial factor in determining the price level.

He said unless stocks held by traders and growers came down, any revival in prices would be under threat.

Traders estimated that a fall in price by Rs 1/ kg would cause a loss of Rs 30 crore to the rubber farming community.

Kerala produced more than 90 per cent of the country's total natural rubber production with bulk of the production coming from the Central Travancore and Southern districts.