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Tuesday, August 16, 2022

India: Domestic, global prices converge in a falling rubber market

From Rs 196 a kg on August 10 to Rs 156 on November 8, natural rubber prices in the country have dropped by 22 per cent. Prices could drop further as the bearish trend seems to continue.

However, one thing that has emerged in this downtrend is that domestic and global market prices have converged.

“The Government is not taking any steps to improve the situation or implementing decisions taken earlier. Sentiments would worsen further if the present situation is not properly handled,’’ said Joy Nadukkara, former MP and a leading spokesman of rubber growers.

Unprecedented imports and the absence of buyers in the domestic market have triggered panic among rubber growers in Kerala, which accounts for over 90 per cent of the production in the country. The rubber sector, as a whole, is passing through a difficult phase even as the price has dropped by 40 per cent. RSS-3 has dropped by 10.4 per cent in Bangkok between January and October compared with the same period a year ago. The corresponding fall in the domestic market RSS 4 is 8.5 per cent.

“The main reason for the large-scale imports of rubber was due to supply crunch which, in turn, resulted in low domestic demand. Any how enhancing the import duty is not a solution to the present situation,” said N. Radhakrishnan Adviser, Cochin Rubber Merchants’ Association.

There are various factors that are keeping international prices at a low key. The demand outlook for rubber is sluggish. Rubber stocks in warehouses managed by China’s Quingdao Free Trade Zone remains high.

Import demand for China is muted. Import of rubber increased by 5.5 per cent year-on-year to 1.67 million tonnes during January-September. China has withdrawn its plan to procure 2,00,000 tonnes for the reserve stocks.

Thailand holds an inventory of about 2,00,000 tonnes of domestically procured RSS. Its earlier statement that it will offload about 200,000 has had no impact on the market. Later, it said that as prices were ruling low, it would not sell now.

A record 2,14,448 tonnes of rubber were imported during April-October. At least 58 per cent of the import was made during August-October when domestic production became normal. This has made the situation complicated and domestic demand dropped sharply, hastening the process of price fall.

The automotive tyre sector stayed away from the market as it had ample reserves of imported rubber. Domestic consumption is estimated to have fallen by 2.1 per cent during the first quarter and by 2.08 per cent during the second.

The Indian Rubber Dealers Federation, a major stakeholder in the plantation sector, has said that if the present crisis is not resolved at the earliest, the situation would be grave.

Due to the loss in the number of tapping days, leave fall disease, fall in rubber prices and extended rain, only 70 per cent of the income is expected from rubber plantations during 2012-2013, said the federation President George Thomas Valy.

“The Government should come forward to support rubber growers and make arrangements for lifting a minimum of 50,000 tonnes before the end of peak production season,’’ said N. Radhakrishnan.

Source: The Hindu

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