By Steve A. Morrell
Decreasing prices of synthetic products and declining oil prices, prompted lowering demand for natural rubber. Producers, particularly of the formal rubber sector and the Regional Plantation Companies ( RPCs) are currently in a spin, pondering the make or break position enforced by dictates of the market.
Rubber brokers said 2015 will continue to be a bad year. Identifying a foreseeable salutary position, they said 2016 could be better. But they cautioned, ‘ Do not expect miracles.’
Particularly China, the US, South Africa, India, and Pakistan, who stockpiled their current net requirements, would now deplete their rubber in hand on releasing their rubber stocks to the market over the next few months.
Consequently, reduction in stocks would result in eventual buying. By year end, the demand curve could be repositioned to generate a stronger supply and demand position.As a result, the economic position would rejuvenate to establish a more healthy market situation. But brokers reiterated their original comment that producers should not expect miracles in the short run.
The brokering source we consulted said demand for natural rubber would increase, particularly that manufacturers of tyres, for instance, would re-position themselves to use more natural rubber. This was one plus example that could influence rubber prospects.
Natural rubber ( NR )production for June this year was 843,201 kilos, from both the RPCs and small holders.
‘The Rubber Economist’, quoted by the Rubber Traders Association said NR and synthetic rubber (SR) production was in decline.
The latest edition of the quarterly report predicts that consumption of NR and SR will rise in 2016 and 2017. Such predicted trends could contribute to a pick –up in rubber prices over the next two years, particularly for hard pressed producers in South East Asia.
Plantation companies said their cost of production was in excess of Rs.350 per kilo indicating continuous losses. These price trends recorded by rubber brokers, placed the industry in an uncertain position. Speculation was rife that subject to continuation of these poor market conditions they might look to the banks for bail out action. Additionally, possibility of government assistance too was not discounted.
Collated prices to date were extremely low. The average for the month of June was Rs.200.84 per kilo. The cumulative average at end June was about Rs. 182.52, indicating the industry was below the red line. Brokers said if there was a silver lining, it had not surfaced.
At the time of reporting, the trade was not available for comment. These views were in large part responses from rubber brokers.
