Natural rubber market is showing signs of revival off-late. Natural rubber prices in the Indian market have now recovered more than fifty per cent from the multi-year lows it hit in February this year.
In the meantime, on the trend setting Tokyo Commodity Exchange, it has bounced up about nearly 40 per cent from the seven year lows hit in February this year to an eight-month high.
Market sentiment now seems to have turned sanguine. Concerns over output as well as expectation of pickup in demand from China have bolstered prices.The key natural rubber growing areas are currently in the midst of lean production phase because of which there is supply tightness in the market. Also, various meteorological agencies predicting the emergence of La Nina weather phenomenon this summer after El Nino have incited worries over output as the major rubber rowing belt is located in South East Asia. Weather phenomenon La Nina is associated with heavy rains and flooding in South East Asia and draught in South America. Rebound in crude oil, joint action by the top natural rubber producing countries, Thailand, Indonesia and Malaysia in the form of Agreed Export Tonnage Scheme, monetary easing by China are lending support as well.
Still, gloomy global economic growth outlook, lingering worries over slowing economic activity in China and forecasts indicating that global natural rubber market may stay in surplus may weigh on, capping gains. In the Indian market, even as natural rubber production in the country has declined sharply, higher imports and stock may weigh on. Moreover, with this steep rise in prices, once the weather turn conducive, production may increase.
On TOCOM, the most active sixth month rubber futures faces stiff resistance at 210-215 yen/kg, which it requires to clear convincingly to keep the present positive momentum intact and ignite another rally. Downside turnaround point is seen near 158 yen. On NMCE, key resistance are seen at 15300/15900/16600 per 100 kg. Major Supports are at 13000/12400-11800 per 100 kg.
