The Hindu Business Line : Bull run takes rubber past Rs 80

NATURAL rubber prices scaled a new peak in the domestic market on Tuesday as the benchmark RSS-4 grade traded at Rs 80.50 a kg here and rs 81 in Kottayam, continuing the sky-high momentum of prices for the third successive week.

Rubber industry sources said deals took place at Rs 80.50 a kg for the ribbed smoked sheet (RSS)-4 grade in Kochi. At the end of trading, prices closed at Rs 80 a kg for the grade in Kochi and Kottayam markets.

From the second week of January it has been a continuous ascent for natural rubber prices, breaking records every day.

From Rs 70.50 on January 10, the price of RSS-4 has surged by Rs 10 for a kg in a matter of just 21 days.

"This is unbelievable. There has never been such a bull run," a trader said.

Domestic prices have soared in line with international prices, which now rule around Rs 10 dearer than domestic spot prices. Prices in the international market escalated on account of speculative flare-up in Tokyo and huge demand from China.

Rising prices crude also contributed to the increase, experts said. However, many believe that the current boom in the domestic market is bubble that can burst anytime now.

"The bubble has blown up beyond imagination. It has to burst one day," a trader said. "The current trend belies the domestic market fundamentals, he added.

For one, the stock position of rubber should be more comfortable than the previous months. The Rubber Board's estimates have it that the stock position at the end of January should be 1.31 lakh tonnes.

A Rubber Board official said production during April-December was up 3.8 per cent over the corresponding period a year ago at 6.12 lt. Consumption in the same period was up 6.3 per cent year-on-year at 5.96 lakh tonnes.

"Our estimate is that production in January would be around 87,000 tonnes," the official said. "There is sufficient stock."

However, seeing the rising prices, growers are holding back their stocks, leading to a scarcity in the market. On the other hand, tyre companies are now actively buying notwithstanding the high prices.

"Growers can now afford to hold back their stocks. Not a day prices have fluctuated and this has given them confidence that prices will further rise. When rubber was not available in the market, consumers panicked and started buying," industry sources said.

However, with production slated to peter out in another fortnight or so, growers will begin to offload their stocks and this may ease the prices, they said.

According to observers, rubber prices could cross the Rs 100 mark for a kg in the near future. It is estimated that the total gain to the rubber plantation industry during the current fiscal could be about Rs 3,000 crore.

Rubber production would touch 7,80,000 tonnes this year according to Rubber Board sources. The rubber plantation industry will have a decisive role in the economy of Kerala as a result of the income generated by the price hike.

There is widespread talk about the manufacturing industry suffering heavily on account of the price rise. But according to Mr Thomas Ouseph, senior analyst and former Secretary of the Rubber Board, such rises in the past had resulted in a boom period for the industry as well when growth and profitability of the manufacturing sector had improved.

The tiny units, however, found it difficult to render business on profitable lines.

Most general merchants have pointed out that increase in rubber prices in the past, lead to hectic sales which indicated that prosperity is linked to the boom in rubber prices.

The price boom has its repercussions in real estates too. There was a time when rubber estates were available in plenty for sale price which ranged from Rs 1.5 lakh to 2 lakh an acre. The sellers were many and the purchasers were few. A totally different picture has emerged now. In some places the cost of an acre of rubber plantation has gone up to Rs 8 lakh. In Kottayam, Kanjarappally, Pala etc, the land value has also picked up correspondingly.

The cost of land per cent is Rs 3 lakh, in rubber belts of urban areas.

Spot prices a kg were: RSS-4 80 (78.75), RSS-5 79 (77.75), ungraded 78 (76.75), ISNR 20 78.75 (77.50), and latex 60 per cent 57 (56).

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