Global natural rubber market slumps, crisis grips local market

Global rubber markets registered the weakest trend on price front today, since January, as there is a very weak demand for the commodity.

The price of RSS-3 grade dropped to Rs 112/kg at Bangkok and there is significant fall in the case of SMR-20 grade.

SMR grade quoted just Rs 86/kg today, paving way to a serious crisis in the local market. Tokyo Commodity Exchange (TOCOM) also recorded lower quotes on March to June contracts.

Although the local market quotes much higher price tags (Rs 137/kg of RSS grade), there is absolutely no takers for the commodity. In Kerala, 7,000 plus rubber dealers observed a day-long strike today, in protest against the deepening crisis, that absolutely grips the economy of the high ranges of the state.

The rubber plantation sector becomes nervous as the fall in the global price of SMR-20 will attract more imports to the country. Thanks to the intervention of the state government, the tyre companies had purchased a good quantity during January. According to leading dealers they bought around 30,000 tones and this pushed up the price to a level of Rs 140/kg.

For the last one month companies are fully withdrawn from the market, paving way to very serious crisis. Major tyre companies have absolutely withdrawn from the local market as overseas market is much attractive to them.

Because of the concessions in the sales tax component, tyre companies had shown some interest in domestic market early this year, but this did not impact on the income of the one million plus farmers.

A leading dealer said that the major beneficiaries of the government’s concessions were the 100 plus leading dealers who supply rubber to tyre companies, but had no impact on the revenue of the growers.

Rubber based industries are now keen on the overseas markets as rubber is much cheaper there. According to N.Radhakrishnan, a leading dealer, the landed price is only Rs 110/kg for SMR-20 grade and there is no way to procure rubber from the local market.

George Vally, president, Indian Rubber Dealers Federation (IRDF) said that there is no business in the rubber sector in Kerala as of now. Due to financial crunch major chunk of the dealers are not in a position to procure rubber from the farmers.

“We are forced to close the business and this is heaviest crisis during last forty years,” he said. IRDF is planning to close shops indefinitely from April 1 onwards. Farmers expected a hike in import duty in the latest budget, but in vain.

Global output to rise in 2015

Meanwhile, Association of Natural Rubber Producing Countries (ANRPC) expect that global output could jump over 5% this year after posting its first drop in a half-decade in 2014. ANRPC expect an international output of 11.18 million tones in 2015.

Production in Thailand, the world’s biggest producer, is likely to rise 7.4% to 4.3 million tones, while production in second-biggest producer Indonesia could remain steady at 3.1 million tones.

“Vietnam, which became the world’s No 3 producer, could see its output rising 4.9% to a record 1 million tones,” said Sheela Thomas, secretary general, ANRPC.

– Business Standard