After a gap of six months, local natural rubber prices dropped below the global tags on Thursday. While the benchmark RSS-4 grade rubber quoted Rs 152 a kg in the local market, it commanded Rs 154 a kg at Bangkok.
Local prices had touched Rs 168 in May this year. Thereafter, the domestic market was ruling higher than the international markets with the gap widening up to Rs17 a kg. This triggered an increase in the import of natural rubber.
However, local prices have been dropping over the past couple of months due to an increase in supply and a drop in local demand. This is also the best production season of the year, further boosting supply in local markets such as like Kottayam and Kochi.
According to experts, the trend is likely to continue till the end of January next year. Experts said global prices are also dropping because demand is weak across the world, especially in China – the largest consumer of natural rubber.
N Radhakrishnan, former president of Cochin Rubber Merchants Association, said supply is rising while demand remains weak. A section of the traders expect natural rubber price to drop to Rs 130 a kg by the end of December. Anticipating such a crash, there is strong selling pressure in most producing centres.
According to Radhakrishnan, it is the global trend which is reflecting on the local markets. He added the market cannot be salvaged through artificial measures.
Meanwhile, import is expected to drop with domestic prices of natural rubber falling below global ones. Import had recorded an all-time high during April-October 2013 at 214,448 tonnes compared with 131,107 tonnes in the year-ago period. This was on the back of the price advantage in the global markets.
However, import may still be advantageous for consuming segments such as tyre manufacturers because Standard Malaysian Rubber (SMR) is available at lower tags.
Therefore, how import goes in the coming weeks will be critical for the local natural rubber market.
Source: Business Standard
