The Hindu Business Line : Rubber may top Rs 70 on monsoon, low yield — Latex production down in April-May; rains could hit tapping

IMPENDING monsoon and lower than expected yield during April and May have increased the prospects for a flare-up of rubber prices in the coming weeks, experts say.

Rubber growers and many traders expect the benchmark RSS-4 grade to cross Rs 70-a-kg-mark in June. Last year in July, the RSS-4 grade touched Rs 67.50 a kg.

"Prices will be high in June-July. Rs 70-75 is possible," said Mr N. Radhakrishnan, President of the Cochin Rubber Merchant Association.

He said currently, the stock position would be only around 75,000 tonnes, down from 1.07 lakh tonnes at the beginning of this fiscal. Monthly consumption of rubber in the country is around 66,000 tonnes.

Production of rubber during the first two months of the year is pegged at 45,000 tonnes each.

"Although tapping took place in these months, latex yield was low due to heat conditions," said Prof K.K. Abraham of the Pala Marketing Society. This trend has affected supply and pulled down the stock position in the market

Since monsoon will start in June, tapping is likely to remain affected in spite of farmers going in for widespread rain-guarding. Monthly production during the rainy season of June and July is expected to be a maximum of 40,000 tonnes.

This possibility could significantly reduce the stock position.

"The stock position then will only be enough for one month's consumption. That is a critical situation," Mr Radhakrishnan said. Last year, stocks fell to a nine-year low of 66,000 tonnes, and was one of the main reasons for the price to shoot up in the domestic market.

Tyre industry, which consumes 54 per cent of total rubber production, plans to increase imports in the coming months and hence does not see prices skyrocketing.

An industry official said most of the imports contracted during April would land in June and July. However, he says that if monsoon turns out to be heavy, prices could touch Rs 70 a kg, at least briefly.

"Now it's really up to the rain gods," he said.

But Prof Abraham said it might not be feasible for tyre makers to import sheet rubber in a big way, given the prevailing international prices and its availability.Though tyre makers have the option to import technically specified rubber (TSR), its usage has not really caught up among many tyre manufacturers in the country.

In the coming weeks, it will be clearer whether rubber will cross the Rs 70 a kg market for the first time.

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