Rubber spot prices touch 10-week low

Prices of natural rubber in the spot market have dropped to their 10-week low following a highly volatile futures market, causing concern among rubber growers and genuine traders here.

On an average, prices of RSS-4 across all futures contracts dropped by Rs 10 a kg on Monday, bringing down the prices of the benchmark grade in the spot market to Rs 89 a kg on Monday from the weekend close of Rs 94.

For the first time in the last ten weeks, the prices of RSS-4 have hit below the Rs 90 mark. Though the spot prices improved slightly on Tuesday to Rs 90, there is panic among local traders of prices dropping further.

The prices had touched their highest of Rs 102 a kg in the main production season (October 2006-January 2007), setting off speculations that the tags would touch Rs 150 a kg during the offseason (March-May).

However, these expectations have now been belied. A section of the growers sees the sharp increase in prices earlier as a planned move by some traders to arrest the price rise in the offseason. The strategy was working now, as growers and stockists had begun offloading their stocks in the spot market with prices plummetting, said a local grower.

According to stockists and dealers here, prices may drop further, with the rise in imports during March and exports not likely to see a matching increase. The average difference between domestic and international prices is Rs 6 a kg, making exports unviable, owing to freight charges and other related expenses. According to the Rubber Board's provisional estimates, total imports increased to 70,035 tonne as on March 1. Traders opined that by the end of FY07, total imports would cross 80,000 tonne.

However, traders are not optimistic on the export front, with rubber exports rubber from the country at 52,484 tonne as on March 1. As global market conditions did not favour increase in exports, the total figure would be around 55,000 tonne by the end of the financial year, way below the expected imports during the same period.

According to experts, there will be a reversal in the export-import performance of natural rubber in the current year. In 2005-06, the country had exported 73,830 tonne, while the total imports were 45,285 tonne.