The Hindu Business Line : Domestic rubber may continue to rule firm

RUBBER prices in the domestic market are likely to rule firm to higher during the next three months on increasing demand and lower stocks, industry players said on Tuesday.

Moreover, lack of rubber in the trees due to dry weather and excess tapping could also affect supply, they said.

"Rubber prices could rule around Rs 60 a kg as the buffer stock has depleted, while some growers are reporting that they are unable to tap rubber from their trees," an industry official, who did not wish to be identified, told Business Line.

The stocks have fallen despite a record 7.11 lakh tonnes production last year. "While production was 7.11 lakh tonnes, consumption was around 7.2 lakh tonnes. Moreover, we have also exported over 60,000 tonnes of rubber this year," trade sources said.

Last year's production was against initial projection of 6.85 lakh tonnes. "What has happened is that due to good prices, the growers have tapped the trees to the hilt. That is now causing supply problems," the sources said.

"During 2002-03 fiscal, rubber (RSS-4) averaged around Rs 38 a kg. Last fiscal, it was over Rs 55. Naturally, it made sense for the growers to tap when the going was good," they said.

However, the official said one reason for the trees running dry was lack of rains. "Fortunately, we are having some rains in Kerala now and it could help improve production," he said.

Kerala accounts for nearly 95 per cent of the total rubber produced in the country.

While growers have been busy tapping, the rebound in the transport sector has led to revival in rubber consumption. The tyre sector consumes nearly 50 per cent of the rubber produced in the country. While movement of goods increased rapidly last year on good production, including from the agriculture sector, sales of two and four-wheelers also rose.

"This has led to a situation wherein the buffer stock at the end of March was only one lakh tonnes," industry sources said.

Currently, the daily offtake of rubber is around 1,000 tonnes and therefore, the stocks could last for only 100 days. "Last year, during the same period, the stock was over 1.2 lakh tonnes," the sources said.

The buffer stock, though not mandatory, is maintained to ensure that rubber consumers do not face shortage. Any change in the stock level has its effect on the prices.

"The demand from the transport sector is expected to continue during the next three months. Exports will continue, while consumers will continue to face problems as imports are still restricted to Visakhapatnam and Calcutta ports only," the sources said.

Tyre manufacturers, in particular, are pinning their hopes on the petition filed against curbs on rubber imports in the Mumbai High Court. The court may deliver its verdict this month-end.

The Government had curbed imports as part of its efforts to help raise rubber prices after they hit a six-year low. The efforts have paid off with the prices now ruling in the Rs 50-57 a kg range. Besides, it also promoted exports by providing incentives, which is expected to continue during the current fiscal also.

"Exports will continue and all these will ensure that the prices are firm. Even in the global market, the prices are seen firm," the source added.