Domestic natural rubber (NR) prices have declined by over 5 per cent since the beginning of this month due to erratic rains, subdued industrial demand and a bearish trend in the international market. Over the past two months, the drop has been ₹23 per kg. On Friday, prices of RSS-4 grade rubber were quoted at ₹161 a kg against ₹169 at the start of the month. Latex prices are down to ₹130.90 from₹148.21.

However, official sources maintain that the drop is temporary, and prices are expected to pick up shortly. They attributed various factors to the fall which included reduced uptake by tyre companies, a drop in global prices (₹130 against ₹170 last year), and slump in demand for latex because of the absence of export orders and flattening of domestic demand.

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It is also pointed out that the easing of supply after sluggishness in July as rains stopped. Tapping resumed in full swing from July end and early August. It is expected that purchases by tyre companies will resume early as their stock levels will not allow them to stay away from the domestic market for long. This will help to bring up the prices, the sources said.

George Valy, president, Indian Rubber Dealers Federation cited the NR availability from the North East states and its accessibility for industries as a contributing factor to the price drop. He pointed out that the production in Assam and Tripura is expected to be in the range of 1.5 lakh tonnes (lt) this year against one lt, and prices are lower compared to Kerala. Intermittent rains have also affected production. The next production season starts from October, he added.

Unfavourable position

Jom Jacob, independent analyst in the global rubber industry, said NR prices in India have substantially lost over the past four weeks due to bearish global trends. The Indian market is also weighed down by a better-than-expected domestic supply during August amid the weak monsoon rains, facilitating uninterrupted harvesting.

Another reason is that the shipping sector has returned to normal and ocean freight rates sharply came down, making NR imports faster and cheaper.

In the absence of uncertainty and concerns over shipping delay, Indian tyre companies cut their NR inventory in the attempt to squeeze the inventory cost, he said.

Apart from the unfavourable supply-demand position, several non-fundamental factors are impacting on the global market sentiment. They include geopolitical tension between China and Taiwan, uncertainty arising from the prolonged Russia-Ukraine war, unending Covid lockdowns in several parts of China, the dollar’s sharp strengthening to a nearly two-decades high, and the continuing weakness in the currencies of major NR exporting countries, he said.

The low-cost rubber originating from Ivory Coast and other African countries also started impacting the Indian NR market and the income of farmers. For instance, he said tyre companies are increasingly sourcing NR from Ivory Coast where TSR prices are 5 to 12 per cent lower compared with major NR producing countries in SE Asia.

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