The Hindu Business Line : Recovery in rubber futures seen continuing

Rubber futures made good recovery during the course of the week. The active September contract, which had closed at Rs 89.82 last Saturday, recovered to close at over Rs 91.08 this week.

The September contract opened at Rs 87.46 on Monday and had increased to Rs 92.89 on Thursday.

Bids as high as Rs 96.50 were also witnessed during the week.

Profit booking moderated the price towards the weekend.

But traders are bullish that the price recovery would continue into the weeks ahead.

For the August contract, rubber futures prices fell sharply on the first day of trading to Rs 91.10, in tandem with the price fall in international markets.

It started recovering strongly by mid-week and closed at Rs 97.16 on Saturday. Unprecedented crude oil price rise led rubber prices to a quick take off.

Lower availability

Less availability of sheet rubber in the market due to heavy rains in the plantation areas supported the upward price trend.

Due to production related issues, mainly as a result of rains — tapping and processing — future prices are still heading north. Reports of a major surge in natural rubber exports during the first four months of the current fiscal, April-July, have also propelled futures prices to new highs.

But farmers and traders are perturbed that large price differentials exist in Indian and international prices, in spot and futures rubber quotations. The differentials often stretch to as high as Rs 15 a kg.

Price differential

Traders attributed this price differential to the lack of active interest and participation by consuming industries in the futures market. Most of them have built up sufficient stocks and have been shying away from spot and futures market, sources in the trade said.

Rubber imports by some large consuming companies have also been reported, which were contracted at an earlier stage when international prices were ruling lower. The price differentials remain, as exporters are still not active in the spot or futures market. Most of the Indian exporters are small players and some of them have not been able to open fresh LCs, sources in the trade said. Some of the major traders are saddled with excess stocks and are not in a position to enter into the market and make firm bids.

With crude prices ruling high, prices of artificial rubber are likely to remain firm, as most of the consuming industries will be forced to consume natural rubber. Rubber futures are expected to remain firm in the weeks to come.

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