Rubber prices catch up with global levels

Industry units using rubber as raw materials fear shortage

Natural rubber prices in Indian markets have been rising fast and have caught up with global NR prices at present.

The price of the RSS-4 grade is Rs 57 per kilogram while its equivalent grade, called RSS-3, in the Bangkok market is trading slightly above Rs 57/kg.

Similarly, the price of ungraded sheet rubber went up to Rs 55-55.50/kg and while ISNR-20 is changing hands at around Rs 56/kg.

The sudden price increase is mainly on account of sudden buying by industry players using rubber as a raw material.

Many such units are anticipating a shortage of NR in the next few months.

The fears are driven by reports that tapping of rubber trees has almost stopped in most of the production centres in Kerala where above 90 per cent of raw rubber latex is produced.

User industry buyers believe that there would be a shortage of NR in April and May owing to lower production.

In the present market scenario, import of rubber has ceased to be a viable option even under the advance licence scheme.

If rubber supply fails to match demand from users, the market will see a bull run, said traders.

Market sources here told Business Standard that the introduction of the value added tax (VAT) structure from April 1, 2005, has led to some panic buying in the market.

Already, rubber supplies appear to be trailing off and the volume of trading in Kerala markets is declining.

Most of the rubber dealers are also setting their house in order as the will come under the VAT net.

Growers said that the summer heat had affected production of latex very badly.

Traders said in response that overall, a shortage of rubber was most unlikely in view of the rise in rubber imports in the current financial year.

Market sources however said a further rise in prices looked unavoidable unless the monsoon set in early or at least on time for latex supplies to pick up.

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Upwardly mobile

• Reports that tapping of rubber trees has almost stopped in most production centres in Kerala are driving fears of a supply shortage
• If supply fails to match demand from users, the market will see a bull run