KOCHI: As the Kerala government begins its market intervention programme to buynatural rubber at Rs 2 more than the market price to raise the price to Rs 171 a kg following persistent demand from the growers, the industry is skeptical on the end result. A section of the industry believes that it will be difficult to increase prices to Rs 171 per kg in the short term for several reasons.
For one, the international prices are ruling so low and the domestic supply is so tight that imports are likely to continue. For another, the automobile market is still not out of the woods. The excise duty reduction has failed to trigger a boom in vehicle sales. Immediately after the announcement of procurement last month, the prices of RSS-4 variety moved up from Rs 144 per kg to Rs 155 per kg, before sliding again. The price stood at Rs 147.50 per kg on Tuesday.
“The current situation is due to the impending futures delivery this month. Fresh buying is strong for April contract. I feel that prices will improve after March 10,” said a leading dealer Biju John. But the optimism is not shared by others. The price of block rubber in the international market is around Rs 117 per kg and hence imports are still cheaper than domestic product. Moreover, tapping has stopped almost completely because of hot weather squeezing the supply.
In the circumstances, the government will have to buy 40,000 to 50,000 tonne instead of the projected 10,000 tonne to lift the prices to Rs 171. The industry feels the 2.72 lakh tonne of stock projected by the Rubber Board at the end of January 2014, is an overestimation and says that its composition has also changed over the years. According to the industry, it should be 30,000 to 40,000 tonne lower.
“The stock with growers and dealers have gone up from 39 per cent to 64 per cent while that with the tyre sector and other rubber goods manufacturers have declined from 61 per cent to 33 per cent,” says Rajiv Budhraja, director general of Automotive Rubber Manufacturers’ Association (ATMA).
According to him, the stock with the growers hardly flows into the market making the industry more dependent on imports . On the other hand the stock with tyre industry has already been factored for production by the tyre companies and cannot really be taken as available in the market. Imports are pegged lower at the start of the year and then revised upwards and the opposite happens for exports.
“But it is high time the imports are recognised as part and parcel of the industry,” adds Budhraja. The projected imports of 2.3 lakh tonne for 2014-15 needs to be revisited as the likely figure is 3.2 lakh tonne, he says. The natural rubber imports in 2013-14 are likely to reach 3 lakh tonne, as production till the end of January 2014 this fiscal has been over 9 per cent down.
Decline in production has pushed India below Vietnam and China in the sixth position among the top rubber producing countries in 2013 as per the data of Association of Natural Rubber Producing Countries (ANRPC).
SOurce: India Times