The Hindu Business Line : Rising rubber prices seen stabilising soon

NATURAL rubber prices are up by Rs 4-4.50 a kg as compared with the same a year ago, but consuming industries are hopeful that the rates would stabilise soon.

The benchmark RSS (ribbed smoked sheet) 4 grade on Thursday closed at Rs 62 a kg, while the INSR 20 grade of technically specified rubber (TSR) was Rs 59 a kg. Last year during the same period, they were quoting Rs 57.50 and Rs 56.25 a kg respectively.

"We are expecting the prices not to go beyond Rs 65 a kg," an official in the tyre industry, which consumes 54 per cent of the country's natural rubber, said.

An international rubber dealer said Rs 65 a kg was possible in the coming days but prices may not flare up like they did last fiscal, when the RSS 4 crossed Rs 67 for a kg.

The factors that pushed up prices last year were a nine-year low stock position (of about 66,000 tonnes), heavy monsoon that affected tapping and exports of natural rubber from India that limited the availability of rubber in the market.

However, this year, things are looking different.

The stock position as of now is sufficient for at least one-and-a-half month's consumption. "On April 30, the stock position would be about 96,000 tonnes," said Mr N. Radhakrishnan of the Cochin Rubber Merchants Association.

The average monthly consumption of rubber in the country is about 66,000 tonnes.

The opening stock in 2005-06 itself was higher by over 30,000 tonnes at 1.07 lakh tonnes on April 1, as against 77,295 tonnes a year ago.

Production in April this year is estimated to be about 45,000 tonnes, and added to this, imports of 6,500 to 7,000 tonnes have come in.

Consumption for the month is pegged at about 62,000 tonnes, thus leaving a stock of about 96,000 tonnes.

Since international prices are ruling below the domestic rates, tyre companies would continue to import, taking advantage of zero duty facility under the advance licence scheme for export production.

A major factor that influenced prices in the past couple of years would be missing this year in all likelihood — exports.

In fact, the exports of 75,905 tonnes of natural rubber in 2003-04 and 45,000 in the year after had helped a great deal in bolstering the domestic prices.

Since the Government has done away with export subsidies, the attraction to export natural rubber has diminished. "Only some 300 tonnes have been imported so far this year," Mr Radhakrishnan said. Also, international prices are now ruling lower.

Nevertheless, if monsoon, slated to begin by end of this month, hits tapping for a prolonged period, prices could rise above than the anticipated levels.

But absence of exports and tyre makers' plan to import about 60,000 tonnes for the year could check a price flare up.

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