Commodities

Improved global demand to boost natural rubber prices, says ANRPC

V Sajeev Kumar Kochi | Updated on July 27, 2021

Global demand is largely driven by China and India

 

The Association of Natural Rubber Producing Countries (ANRPC) has projected a rise in the prices of natural rubber in the short term, thanks to improved demand from China, India, US and Europe.

All these countries can add to the recovery in global rubber demand, as China alone represents 43 per cent share in global rubber consumption, says the Rubber Market Intelligence Report of ANRPC.

Global demand, according to the report, is largely driven by China and India — the largest consumers in the world — with India accounting for 8 per cent of the world natural rubber consumption. Manufacturing activities in China have been restored, generating enormous demand for raw material.

Risk factors

Helped by lifting of Covid restrictions in several States, activity in India are also expected to gain momentum. For Indian manufacturing companies, rubber imports have become more expensive due to disrupted global logistics, delayed shipments, and abnormal increase in ocean freight cost. The stronger dollar, besides the basic customs duty at 25 per cent of CIF value and additional duties for imported RSS and TSR, has made imports more expensive. All these factors have made domestic sourcing a preferred choice over imports.

Global natural rubber supply will be hit by Covid-19 spread in producing nations: ANRPC

However, the report highlighted some risk factors such as the global spread of the Delta variant of Covid-19 virus that can potentially undermine the favourable conditions and can cloud any positive market sentiments.

Positive for commodities

The announcement of the US Federal Chair not to scale back the stimulus measures is positive for commodities, including natural rubber, because a shift towards hawkish policy (policy tightening) could have triggered outflow of speculative funds from commodities.

The ANRPC report went on to add that natural rubber demand from South-East Asia is expected to remain weak in the short term amid rising Covid cases and poor inoculation progress.

Higher MSP may see Kerala growers produce more natural rubber from April

The crude oil market is unlikely to continue its rally in the short term as OPEC countries have reportedly reached a preliminary deal on gradually raising the oil output until December 2021. However, the high seasonal summer demand and the brighter fuel demand arising from the lifting of restrictions can hold the market from falling from the current level, the report said.

Published on July 27, 2021

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