Although Indian natural rubber prices have moved up 4% during the month mirroring the global trend, the industry is not certain whether the upturn will be sustained.
The current rise in international markets is stoked by a series of announcements aimed at reducing the surplus stock of natural rubber in the world. Thailand, the largest producer of rubber in the world, has announced subsidies for rubber farmers and proposed to buy rubber from the market. This led to a rise in global prices that had fallen to Rs 97 per kg. The Bangkok price touched Rs 105.42 per kg on Monday.
“All these steps are directed towards curtailing supply while there has been no increase in demand, particularly from China, the largest consumer. So it remains to be seen whether the uptrend will be sustained without a spurt in demand,” said C P Krishnan, whole-time director of Geojit Comtrade. Futures prices on Tokyo Commodity Exchange showed a correction during the past week after a long period of fall. Indian rubber prices too have risen about 4% in the past one month to reach Rs 126 per kg.
The recent declaration by the Kerala government to procure rubber at Rs 5 more than the market prices too may have helped boost the sentiment.
Though it is the peak harvest season in India, tapping is still not in full swing. “Rains have hampered tapping in Kerala for the past three weeks. Moreover, at the current price level, growers are not very interested to carry on tapping,” said Biju John, a leading rubber dealer. According to him, the futures in NMCE are also not showing a buoyant trend.
“Rubber farmers will not be interested in selling unless the Kerala government purchases at Rs 150 per kg or till it rises to Rs 171 per kg. Growers need at least Rs 150 per kg to cover the cost of production,” pointed out N Radhakrishnan, former president of Cochin Rubber Merchants Association.
Production in the past two months has plummeted by around 25% and the imports have gone up substantially. By the end of September, imports reached over 2.25 lakh tonne, around 1 lakh tonne less than the quantity imported for the whole of past year. Imports are continuing at a steady pace in October too.
“Imports contracted in the past few months are arriving now. Availability continues to be low in the domestic market,” said a senior officer of a leading tyre company. Demand for tyres continues to be sluggish during the third quarter too.