The Hindu Business Line : Rubber plunges below Rs 60-mark

EVEN as natural rubber prices continued to surge in the international markets, domestic prices kept falling and sank below the Rs 60-a-kg mark today, baffling traders and growers alike.

The benchmark RSS-4 grade (Ribbed Smoked Sheet-4) was traded at Rs 59.50 a kg in Kochi. "We have bought 50 tonnes at Rs 59.50 a kg," said a dealer.

Contrary to projections that the price would rise in June, this year the opposite has happened till date. Prices came down from Rs 63.75 on June 1 to the present level as monsoon turned out to be too weak to affect tapping.

Last year, however, the domestic market in June saw an almost steady ascent of prices, which moved up from Rs 60 a kg in the first week to Rs 66.50 by the end of the month.

With today's price fall, the difference between international and domestic prices has widened further. International prices are around Rs 5.50 a kg higher now. The corresponding RSS-3 grade touched $1.50 (free on board) in Bangkok today, up two cents from Thursday.

Across markets in Asia, rubber prices moved up today. Rubber futures, powered by steep gains in the Tokyo Rubber Exchange, also ended higher in the region.

The rubber industry is quite surprised at the regular price fall in the domestic market, where prices have in the past tended to rule a tad higher than the international prices, as the country consumes more natural rubber than it produces a year.

According to Mr N. Radhakrishnan, President of the Cochin Rubber Merchants Association, tyre companies, which consume over 50 per cent of the country's natural rubber, had built up adequate stocks, fearing a price flare up during monsoon.

Also, unlike last year, the stocks of rubber in the beginning of the fiscal were higher by about 30,000 tonnes at 1.07 lakh tonnes from the same time a year ago. Tyre companies also imported around 18,000 tonnes of rubber so far, which is just about the same quantity as in the corresponding period last year.

However, as against an export of 4,894 tonnes in the first quarter last year, this year exports have not really taken off as the Government withdrew the incentives, adding that much rubber in the domestic stock.

The comfortable stock position, coupled with a weak monsoon that let undisrupted tapping, gave room for consumers to play safe in the market. On the other hand, growers panicked and tried to dispose of the stock, accentuating the fall.

Another factor that impacted the prices has been the domestic futures market, where also the quotes kept falling.

Rubber industry sources say that the present disparity of over Rs 5 a kg between the international and Indian rubber should lead to exports happening again as it is viable to export at this rate even without the subsidy.

"Next week, we should see some enquires coming. We have already contracted for some latex export," a dealer said.

Also, there is a view that tyre makers cannot afford to stay away from the market any more and they will not be able to resort to import at the current international prices. Many traders expect prices to improve next week.

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