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Friday, June 2, 2023

All about rubber futures

The Multi Commodity Exchange of India (MCX) launched rubber futures contract last week. India is one of the largest producers (Kerala contributes nearly 80 per cent) and consumers of natural rubber. Industrial consumers, including manufacturers of automobiles, electronic goods and healthcare equipment, and also growers, can now use the futures contract to hedge their price risk.

Contract specifications

The rubber futures contract (RUBBER) will be traded Monday through Friday from 10 am to 5 pm. The contract will expire on the 15th of every month. MCX has launched four contracts now — one contract each expiring in the months of September, October, November and December. The rubber traded will be of ribbed smoked sheets 4 quality (RSS4).

One lot of a rubber contract is one metric tonne and the maximum order size is 50 metric tonnes. However, the price will be quoted in rupees per 100 kilograms with a tick size (minimum price movement) of ₹1. The price will be as per ex-Kochi, Kerala exclusive of GST.

If you want to take a position in the futures contract, a minimum of 4 per cent as initial margin (on contract value) will be required, along with an extreme loss margin of 1 per cent. A special margin may also be imposed on the buy/sell side, or both, if the regulator or the exchange finds it necessary in circumstances such as increased volatility in prices.

When it comes to delivery, rubber futures are compulsory delivery contracts with Kochi as the delivery centre. The time period allowed for delivery is two days from the date of expiry of the contract.

Price drivers

The global production of rubber is around 12 million tonnes, and nearly 5 million tonnes are being consumed by India and China. Thus, the main factors that influence rubber price are global availability and (domestic) consumption of rubber. Other factors such as weather conditions, currency movements and development of automobile industry also a play crucial role in determining rubber prices.

About rubber

The Rubber Board monitors and promotes the rubber industry in India.

The peak production time for rubber starts from September-end and continues till January-end. Rubber requires

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