KOCHI (Commodity Online): Global recovery hopes, the crude oil rally and fall in output forecasted in key producing nations has helped sustain natural rubber prices at reasonably high levels in recent times.

Production in Thailand, the world's largest producer and exporter of rubber is expected to drop this year on heavy rains disrupting plantation work in Southern regions. With the result RSS3 grade prices have risen to $2.46 per kg. News reports quoting Thailand Agriculture Ministry suggested that Thailand's output is expected to fall from 3.1 mn tonnes last year to below 2.5 mn tonnes in 2009.

The major boost to rubber has come from the postive develoments in China whose industrial production and retail sales have zoomed by more than 16% as on October on an annualised basis. China being the largest consumer of natural rubber could boost demand in the days ahead.

In India, there has been a demand supply mismatch as production has droped by 9.5% in the first seven months of the current financial year (2009-10) while consumption has risen by 3%. According to Rubber Board, production fell to 435,125 tonnes in April-October period, compared to 480,230 tonnes in corresponding period last year. Due to prevailing higher prices in international markets, Natural rubber (NR) imports declined 50 per cent in October compared with the same month last year. The imports fell to 8,574 tonnes against 16,010 tonnes in October last year. Consum;piton has edged up to 536,100 tonnes.India is the fourth largest producer of the commodity after Thailand, Indonesia and Malaysia.

Till September, imports were on a rise due to a sharp increase in the local prices of the commodity . The international prices of RSS-3 grade were lower than the Indian prices, the difference being around Rs 17-18 a kg. This encouraged importers to utilise the price advantage.



The rubber-based industry, especially tyre makers, also reaped the benefits of the global price advantage, leading to a rise in imports in the first half. This sharp rise in imports led to an increase in the rubber stock in India. By the end of October, the country possessed 219,000 tonnes of rubber as against 150,000 tonnes in the same period last year.

At present, the price situation is in a reverse mode as the international prices are higher by Rs 7-8 a kg compared with the local prices. So, the imports have become unviable.

India's tappable area has risen but fall in productivity has hurt the production prospects thus putting the prices in a stable to bullish mode, analysts said. So far rubber growers have had a remunerative farm gate price this year as futures and spot prices have ruled above Rs 100.

According to Association of Natural Rubber Producing Countries, 2009 has witnessed a falling trend in global supply upto September.Total output in the seven countries accounting 93% of the global supply fell 5.1% in the 12 months to September 2009 as compared to the year ended December 2008. The output fall in the 12 months to August 2009 was 3.7% only.

Malaysia has so far witnessed the highest drop in output at 19.3% while China has witnessed a fall of 17.9%. Malaysia Farm Ministry had expressed the hope that shortfall so far would be compensated by 26% expected growth in production in the September-November period. The fact that many countries have undertaken replanting replacing old trees during the 2003-09 period has also affected production levels which will be bridged only in the coming year.

International Rubber Study Group (IRSG) in a report released in October points out that there has been a surge in new plantings in 11 Asian countries during 2005-08 period. These countries constitute 92% of total global output. The fact that tapping becomes after after 5th and 7th year of planting gives rise to the possibility that supply will surge strong enough to beat the present bull phase. In 2008 total new planting is estimated to have reached around six times the level of 2000.

The consequences for total area are significant: more than one million hectares have been added during the period 2005-2008. Supply potential will show significant increases: the levels in 2015 and 2020 are expected to be around 30% and around 50% higher than in 2008, respectively.

Post your comment  (0)

Connect:

Post to Twitter

Post to Facebook