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M.R. Subramani

Over 20,000 tonnes import likely; exports grind to a halt

Chennai , Nov. 30

Prices of natural rubber are likely to come under pressure during December-January as production is projected to outstrip demand. The prices for ribbed smoked sheet (RSS) 4 could slip to Rs 70 a kg and even lower, according to analysts.

"Rubber prices could decline just on fundamentals. Exports have come to a halt and imports will take place. Besides, there will be surplus in production," said Mr N. Radhakrishnan of Cochin Rubber Merchants Association.

RSS 4 prices

Prices for RSS 4 were quoted at Rs 78 a kg in Kottayam on Thursday. This is against the average price of Rs 93.99 during the first half of the current fiscal. According to an Automotive Tyre Manufacturers Association (ATMA) official, with the peak production season currently on and import of over 20,000 tonnes of rubber on cards, prices were set to decline.

"During April-September 22,500 tonnes were imported and in the second half of the fiscal, 30,000 tonnes will be imported," the official said. Last year, imports totalled 45,285 tonnes.

Imports under OGL

Most of the imports are being made duty-free under open general licence (OGL) against export of rubber products, especially tyres.

According to Mr Radhakrishnan, rubber stocks at the end of October were 64,000 tonnes. During November, as per the Rubber Board, rubber production was likely to be 90,000 tonnes, while consumption would be 70,000 tonnes.

"There will be 20,000 surplus production in November. Again in December, production could be around one lakh tonnes, while consumption would be 70,000 tonnes, which will leave a surplus of 30,000 tonnes. But if we take into account import of around 10,000 tonnes, then we could have an excess supply of 40,000 tonnes," he said.

On the other hand, exports are not taking place since domestic prices are Rs 7-8 a kg higher than international prices. "Exports cannot take place in such a situation. Actually, prices went up all of a sudden early this week in the futures market by Rs 5 a kg. That has led to a situation where growers now think prices may go up in December," Mr Radhakrishnan said.

On NCDEX, rubber for December contracts were quoted at Rs 7,764 a quintal, while January contracts were quoted at Rs 7,811.

During April-October 50,000 tonnes of rubber were exported as international prices were higher than domestic rates. Last fiscal, a record 73,380 tonnes were exported.

If prices rule high and with projections of a stock build-up, buyers may adopt a wait and watch attitude. "But if international prices rise and buyers rush in to cover their requirements, the situation could change," said Mr Radhakrishnan.

"But how long can the current price line hold is a moot question," he said, adding that the user industry could adopt a policy of buying only for immediate requirement.

More Stories on : Rubber | Exports & Imports | Outlook

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