The Hindu Business Line : Rubber prices to stay range-bound

THE spot rubber market remained in a narrow band with a mixed trend during the week. The expectation of better arrivals kept the buyers on the sidelines throughout. With only three trading days followed by a 24-hour vehicle strike, Gandhi Jayanthi and Pooja holidays, the market remained in a holiday mood.

RSS 4 the market indicator opened at Rs 49.50 on Monday closed at Rs 49.25 on Friday. The losers of the week included ISNR 20 and ungraded rubber while RSS 5 and latex remained flat on steady demand.

The deficient monsoon this time in the rubber growing regions of Kerala has seriously affected the crop.

Weather data from the Meteorological Department indicated that the monsoon was insufficient this time in Kollam and Kozhikode by 32 per cent, in Palakkad by 34 per cent, in Pathanamthitta by 21 per cent, in Thrissur by 28 per cent, in Malappuram by 25 per cent and in Kottayam by 18 per cent. Because of this deficiency, the growers do not expect the crop to substantially go up from October, the peak season. Many are keeping available stock expecting the physical market to rise above Rs 50.

The rubber futures opened weak on Monday. The prices managed to bounce back to the positive territory on Tuesday but failed to maintain the high levels on Wednesday. Prices improved on short covering on Friday.

A steady accumulation was witnessed in the December and January contracts, taking the net open position in rubber futures to 2163 lots. The January contract closed at Rs.50.78 at the weekend.

The benchmark March contract breaking the key support level of 130 Yen in the middle of the week spurred heavy liquidation, halting the bull-run in TOCOM.

A stronger Yen accelerated the weakness. Although, SICOM went into red early this week following the TOCOM trend, the US and European purchases took the market back to the positive territory.

Chinese buyers are expected to be back on the trading floors after a weeklong holiday. With total demand for rubber already exceeding 10 million tonnes, China along with some other Asian nations such as South Korea would be the principle factor driving the natural rubber prices in the coming years.

The Chinese demand will be mainly propelled by a phenomenal rise in the production of automotive.

The Asian physical rubber prices are expected to rule firm in the week ahead on steady demand and limited supply. Meanwhile, a study by Bangkok-based experts has predicted an acute shortage of NR in the global market.

The domestic market is expected to be range-bound in the absence of any market moving factors. Even if the futures managed to stay above Rs 50, spot market experienced strong resistance at the same level. The Rs 48-level could act as a major support to the physical market while a close above Rs 50 would help to firm up the prices technically.

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