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Natural Rubber prices may remain depressed in 2013 on spike in surplus: Macquarie

On Monday, key rubber futures at Tokyo Commodity Exchange (TOCOM) for August delivery fell to 271.3 Yen per kg on Monday due to weaker stock markets and rise in rubber inventories in China. Fall in Oil futures due to weaker dollar also impacted prices. Brent crude fell 1.16% to $108.55 while WTI crude fell 1.19% to $92.34 per barrel.

SINGAPORE/MUMBAI (Commodity Online): Natural rubber prices may remain depressed on expanding global rubber stocks which is expected to improve margins for tyre makers as natural rubber accounts fo 50-60% of raw material costs, according to Macquarie Equities Research.

Macquarie’s Soft Commodity team suggests that rubber price will stay lacklustre due to an expanding surplus in 2013. “Our Global Oil & Gas team‟s forecast of US$106/b 2013 Brent oil price vs US$110/b in 2012 also gives us more confidence of limited upside risks for synthetic rubber and chemical costs. We believe the soft raw material costs should be a positive factor for tyre makers’ margins in the coming year.”

Within the 60% rubber cost, natural rubber and synthetic rubber generally break down to 36% and 25%, respectively. Natural rubber is used more in truck tires, while synthetic rubber appears more in car tires. A high correlation is founded in the price trend of these two types of rubber.

The effect of new plantings undertaken in 2006 to 2008 will be seen from 2012 onwards. Therefore, rubber prices will ease assuming normal weather conditions.

In 2H 2012, the natural rubber market returned to a modest surplus.

Surplus pressuring rubber prices into 2013: At the beginning of 2012, Thailand’s proposed intervention scheme (government buying NR to prop up prices) had a bullish influence on natural rubber prices. “We expect the expanding global NR stocks will weigh on prices into 2013 and leave NR prices to hover around, forecast prices to fall back in 2H, and into 2013.”

On Monday, key rubber futures at Tokyo Commodity Exchange (TOCOM) for August delivery fell to 271.3 Yen per kg on Monday due to weaker stock markets and rise in rubber inventories in China. Fall in Oil futures due to weaker dollar also impacted prices. Brent crude fell 1.16% to $108.55 while WTI crude fell 1.19% to $92.34 per barrel.

In spot markets in India, RSS4 grade natural rubber prices have moved up from Rs 15700 per 100 kg to 16250 per 100 kg while rubber futures for April delivery at National Multi Commodity Exchange (NMCE) has falen 0.80% to Rs 16324 per 100 kg. “RSI of 49.74 is neutral while MACD crossover of signal line suggests likely buying activity,” Sreekumar Raghavan, Chief Strategist at Commodity Online said.

Source: Commodity online

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