Auto sector growth to push up demand for rubber

The progress achieved by the global automobile industry during the second lap of the current year gave a fresh impetus to the demand for rubber and it continues to scale further highs.

The weather changes due to global warming in most of the rubber producing countries have affected production. According to the assessment of the Association of Natural Rubber Producing Countries (ANRPC), rubber production will lower by 6 per cent this year.

Major consumers

China is the major rubber consumer and requires maximum rubber for its use now, since its stock position is very low. The US and the European countries are procuring large quantities of rubber. The industrial progress in Japan has also enhanced consumption in that country.

India, which overtook Japan in rubber consumption, made a record import during the current fiscal. The untimely rains and floods that followed reduced the availability of rubber from Thailand and interrupted the movement of rubber there. Once the rains subside, winter would commence.

According to weather forecasts, winter will be severe this year. This will also adversely affect rubber production.

It is estimated that annual rubber production in Thailand would be only within 2.5 million tonnes. But, in 2008, the production there was 3.1 million tonnes. In Malaysia too,tapping has been suspended due to heavy rains. Large-scale cutting down of trees intended for replanting has worsened the situation. The production loss of Malaysia during January-September was 24 per cent. Severe winter in Indonesia brought down the availability of rubber to very lower levels.

In India also, weather has curtailed production. Rubber production during the first seven months of the current fiscal was down by 9.4 per cent and reached 435,125 tonnes. Last year, the production during the same period was 480,230 tonnes. The rubber consumption shot up by 3 per cent and touched 536,100 tonnes. In the international market, where the price was ruling low during the early months, large- scale import of rubber by India brought relief to the deadlock in the market. India imported 126,472 tonnes during April-October.

Compared with the former years, the increase in imports was 233 per cent. By March next, the imports would reach 1.5 lakh tonnes. The export from the country touched almost the bottom lines.

During the April-October period, a consignment of only 3,859 tonnes was exported. But, in the previous year, at the same time, the export was 34,000 tonnes.

At the beginning of the current fiscal, the market commenced with a price of Rs 83.50 a kg for RSS 4 grade. The price has now shot up to Rs 118 a kg. The stock position at the end of October was 2.19 lakh tonnes. The stock last year at the same time was only 1.5 lakh tonnes.

The arrival of large quantities of foreign rubber to the domestic market could, in fact, help avoid a crisis.

Auto industry growth

The severe drought at the beginning of the year and the subsequent heavy rains all over in Kerala caused a setback to rubber production.

The growth achieved by the automobile industry was appreciable and it created similar repercussions in the tyre producing sector also. Some foreign tyre companies are desirous of investing in India to start new ventures. This will strengthen the demand for natural rubber.

While in the domestic market, RSS 4 is traded at Rs 118 a kg, the same grade is priced at Rs 123.56 a kg at Singapore Commodity Exchange (SICOM).

Availability reduced

Though September-December is a high productive phase for rubber, this year, it was not so favourable till the end of November. The availability was reduced due to climaticvariations. In November-December, the latex flow is very high. But heavy rains succeeded in disrupting tapping. Now, rain has almost receded and the days ahead would witness intense tapping and as a result of which, the movement of rubber to the marketing centres would also gather momentum.

But, even if arrival enhances the confidence that the possibility of a price crash is very remote gives more strength to the bullish trend prevailing in the market. However, prices would continue to rule above the Rs 100 mark in the coming days as is evident from the favourable wind blowing at present with prices touching Rs 118 a kg for sheet rubber.