Rubber prices have been witnessing selling pressure for the past couple of months. But lower production during monsoons and some positive consumption data from China are expected to support prices in the next couple of months.
In May first week rubber prices declined to Rs 140 per kg in the spot market and Rs 136 per kg in the futures market. Thailand, the largest producer of rubber, had announced its plans to offload its large stockpile. The country along with the other two leading rubber producers- Malaysia and Indonesia- had been holding back stocks for some time now to revive prices, which are almost 30 per cent down this year. However, these efforts did not bear any fruit. Thailand had built up stocks of around 220,000 metric tonnes and it wanted to release the stocks before the start of the production season.
“This development hit both international and Indian rubber prices. Both TOCOM and India prices were at four-and-half year lows. However, Thailand later rolled back its decision following which the prices made a slight recovery,” said Hareesh V, senior analyst, Geojit Comtrade.
In the futures market, prices recovered to Rs 150 levels and were trading at Rs 142 by the end of last week. Prices are still depressed against the all-time high levels of Rs 240 per kg.
But Indian prices are still at a premium of Rs 20 against international prices. The price difference has however narrowed down from Rs 50 a year back.
Due to higher domestic prices, the imports have been on the higher side. In April and May imports were almost double at 63559 tonnes against the same months last year. The production has been down by seven per cent, according to the data by Rubber Board.
Meanwhile, there has been some positive data from China. The stock levels of Shanghai Warehouse were down in the past two weeks. This indicated higher consumption by the automotive and non-automotive sectors.
Rubber production in India has entered lean phase as the monsoons in Kerala will halt tapping. A large number of farmers had sold out their stocks when prices recovered to Rs 150 recently. So the availability of the commodity will remain an issue in June and July.
“By mid-June prices may recover to Rs 150 levels and by July it can further move up to Rs 160 – 162 per kg. But lower demand from automotive and non-automotive sectors will cap the prices at that level. Further, the subdued international prices will force consumers to import rubber,” said Hareesh.