Vipin V. Nair

Kochi, March 17

NATURAL rubber prices are likely to move up further in the coming days on tight supply of the commodity in the market and continuing demand from consuming industries, industry sources said.

The benchmark RSS (ribbed smoked sheet) 4 grade on Thursday touched Rs 55 a kg, the highest rate since the beginning of 2005.

"Many dealers are now stocking up... Tyre companies are also active these days," the sources said.

The dealers have already entered into contracts with tyre companies and other consumers to deliver rubber next month at rates such as Rs 53.50 a kg and Rs 54 a kg etc.

Since the four per cent value added tax (VAT) is coming into effect from April 1 in the place of the present 12.65 per cent purchase tax in Kerala, consumers are asking dealers to stalk up for their future buying.

This will help them buy rubber at a lower tax rate from April 1 onwards, the sources pointed out.

"If they were buying now, they would be paying the purchase tax of 12.65 per cent."

The State Government, which had earlier imposed a 12.65 per cent tax on the closing stock with the dealers, has since lowered the rate to four per cent, which is the same as that of the VAT.

So dealers, who used to dispose of their stock till a couple of weeks back, are now keeping their stock since there will not be any mismatch between the VAT and the tax on their closing stock.

However, some tyre companies are actively buying even now. Industry sources say one particular tyre company is buying 200 tonnes of rubber almost on a daily basis.

On the other hand, rubber supplies are dwindling since tapping is petering out in most plantation areas. The future market is also showing higher prices - Rs 57 a kg and upwards - for the coming months.

So once prices showed the upward tendency, dealers who had contracted for next month's deliveries actively bought the commodity for covering up.

The sources said unless major plantation areas get some rains, tapping would further come down. "Prices should go up. Actually we had anticipated a price rise only in April," the sources said.

Our Kottayam correspondent reports: Spot rubber prices maintained the uptrend as covering groups continued to chase the narrow arrivals.

Speculations on a firm trend ahead and a sharp decline in production due to extreme dry spell accelerated the buying interest in almost all grades. The market seemed to be suffering from acute shortage of the raw material as RSS 3 closed at Rs 55 a kg at Kottayam and Kochi from Rs 54.50 on Wednesday.

The NMCE rubber futures continued to gain supported by strong overseas markets. The April contract was quoted at Rs 57.10 (Rs 56.70), May at Rs 59.05 (Rs 58.75), June at Rs 60.14 (Rs 59.94) and July at Rs 61 (Rs 60.62) per kg for RSS 4. According to sources, volumes also improved on fresh buying coupled with short covering.

RSS 3 closed at Rs 57.18 against Rs 57.07 a kg at Bangkok while its April futures flared up to 139.5 yen against 136.4 yen at TOCOM.

Spot rubber prices were RSS-4 Rs 55 (Rs 54.50); RSS-5 Rs 54 (Rs 53.50); ungraded Rs 53.25 (Rs 53); ISNR 20 Rs 54 (Rs 53.50); and .atex 60% Rs 40 (Rs 40).

(This article was published in the Business Line print edition dated March 18, 2005)
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