Rubber growers go easy on tapping as price drops 22%

Natural Rubber (NR) price has fallen by 22.15% this week, on a year-on-year basis. This is despite the slowdown in the estate-to-market stock movements, in tandem with the tapering down of the latex production season.

Price of the premium RSS-4 grade rubber at Kottayam market has dropped to Rs 123 per kg this week. (Source: IE)

Natural Rubber (NR) price has fallen by 22.15% this week, on a year-on-year basis. This is despite the slowdown in the estate-to-market stock movements, in tandem with the tapering down of the latex production season. Price of the premium RSS-4 grade rubber at Kottayam market has dropped to Rs 123 per kg this week. In the corresponding week in January 2017, RSS-4 had sold at Rs 158 per kg. “Apparently, the tyre firms have been dipping into rubber imports to build up their inventory, when the international price is staying lower,” according to Sibi Monipally, secretay, Indian Rubber Growers Association (IRGA). “In Kerala, which accounts for 90% of country’s NR, the plantation owners are fed up by the price level that does not even meet the production costs. Most of them have stopped tapping this season, to save at least the wage costs,” he told FE. Last week, the price was slightly better at Rs 129 per kg. This fell by 5% to Rs 123 per kg, on falling demand from tyre sector. February contracts have dropped a tad to Rs 125.40 per kg on NMCE (National Multi-Commodity Exchange), compared to Rs 125.42 per kilo earlier. The contracts for March, April and May have slid to Rs 127.20 per kg, Rs 129.99 per kg and Rs 131.09 per kg. “Anticipating higher prices in December, the plantations had been on tapping overdrive. But the industrial off-take was feeble,” says Josekutty Antony, president of Rubber Nursery Owners’ Association. Usually, tapping for the new yield would begin at the end of May after a three-month off-season period.

What tilted the growers plans was that the price difference between domestic NR and international NR stays as wide as Rs 30 per kg. This affords a window of opportunity though which the country’s industrial consumers have been importing to build up their rubber inventory. The international price for block rubber is currently as low as Rs 95 per kg.

“The Association of Natural Rubber Producing Countries had predicted huge buying appetite from China in proportion to its construction spree and that this would push up the international price of NR. However, this phenomenon is yet to play out,” says P Rajendran, a commodity price researcher. Despite crude prices surge, the international price has been low. Even the decision of the price cartel, Tripatriate Rubber Council consisting of Thailand, Indonesia and Malaysia, to stop exports till March, has not hauled up the international price.