Rubber prices continue to sag despite rearguard measures

Imports from Thailand and Malaysia render domestic tapping unviable

Despite efforts to lift sagging natural rubber prices, not much upside is expected in the near to medium term. Prod-uction deficit in the Indian market is being taken care of by sufficient stocks in the international market as the consumers opt for cheaper imports.

At Rs 120 per kg, rubber prices have fallen substantially from the record level of Rs 240 per kg a few years back. From the beginning of the year, prices have dipped 27 per cent. In order to support prices, Kerala, the largest producer of natural rubber, last week announced plans to buy the commodity from farmers at a premium of Rs 5 per kg above the market price.

The Kerala government has asked the prime minister to totally ban rubber imports to halt fall in prices. According to state chief minister Oommen Chandy, the rubber board had assessed a supply-demand gap of 60,000 tonnes for 2014-15 and the country had imported 3.25 lakh tonnes of natural rubber against the domestic stock of 1.8 lakh tonnes. This discrepancy has had its impact on domestic prices, pushing it down to Rs 120 a kg from Rs 240 a kg a few years back, he told the prime minister.

Kerala sought a duty hike on sheet rubber and rubber products from the current 8 per cent to 40 per cent. It also wanted to levy an import cess of Rs 2 per kg on synthetic rubber as in the case of natural rubber.

Meanwhile, in the international market also, prices have been falling. Last week, natural rubber prices dipped to Rs 88 per kg in Malaysia and Rs 95 in Thailand. To check falling prices, Thai government decided to spend 8.5 billion baht by paying farmers 1,000 baht per rai (6.25 rai is one hectare). The government also approved plan to start buying rubber from October 22 to lift prices to at least 60 baht or Rs 113 a kg in two months. State-owned Rubber Estate Organisation also will spend 20 billion baht in building up stocks and another 10 billion baht to buy rubber sheet.

“However, these measures did not lift the sentiments in the market. At the end of last week, Thailand prices just inched up to Rs 99.5 a kg and Indian prices were trading around Rs 123,’ said Hareesh V, senior analyst, Geojit Comtrade.

Meanwhile, the production of natural rubber in India dropped by 25 per cent in September after many planters halted production as rubber prices declined below cost of production.

As per rubber board data for the month, production declined to 60,000 tonnes against 80,000 tonnes in September 2013.

On the other hand, consumption of natural rubber increased marginally by 0.6 per cent to 85,500 tonnes against 85,000 tonnes in the same month last year. The deficit of natural rubber for the month stood at 25,500 tonnes. The country imported 41,848 tonnes of rubber in the month. Between April and September 2014 the imports have gone up by 24 per cent to 225,625 tonnes against the same period last year.

“Planters find the cost of production higher than rubber prices and have halted tapping in many places. But lower production is not going to trigger the supply-demand dynamics and support prices as the international prices are even lower and the companies are importing rubber from Malaysia and Thailand,” said Murukesh Kumar, manager, research, Inditrade Commodities.

According to Hareesh, prices can move up to Rs 128-132 on the upside and may not fall below Rs 118 in the near to medium term. However, prices may not move up above Rs 132 due to higher stock levels and subdued prices in the international market.