Natural rubber prices head north

A rubber tree and bowl filled with latex (Source: ShutterStock)

Sluggish production, import hurdles and costly crude oil are driving up the prices of natural rubber as the country heads for a lean season for the commodity.

The prices of tyre-grade variety RSS-4 have moved up by over 7 percent in a month to Rs 172 per kg on Wednesday. After reaching Rs 191 last December, the prices had plunged to Rs 161 by February before rallying again.

The rubber industry reckons that the lean season in April and May and the anticipated rise in demand in those months, along with the delay in imports, could propel rubber prices to Rs 180-190 a kg level.

After a robust production in the last few months, tapping of natural rubber (NR) slowed down in March with temperatures rising in Kerala, the largest rubber-producing state. However, tapping that resumed after winter in the north-eastern states, which account for over 20 percent of the total production, is still continuing.

In the last few years, hot weather put an end to tapping in Kerala by February, but this time it is different. “Small growers, who began active tapping late after losing out in the initial months at the start of the peak season in September due to heavy rains, are still getting good yields. For big companies like us who are forced to continue tapping despite adverse conditions, the yield has fallen,” said Santhosh Kumar, ED, Harrisons Malayalam Ltd, the biggest rubber producer in the country.

‘Purchases from local market to go up’

The international price of equivalent tyre-grade RSS-3 variety, which hovered in the range of Rs 142-146 per kg in January –around Rs 15-20 lower than the Indian prices -- began to shoot up last month in tandem with the rise in crude oil prices, narrowing the difference with Indian rates. By the end of the month, global prices overtook Indian rates and reached a high of Rs 172 per kg in the first week of March before falling. It is ruling at Rs 5 below the Indian price now.

Rubber dealer N Radhakrishnan said the prospects look good for growers as purchases from the local market may go up. “When crude oil prices increase, petroleum-based synthetic rubber prices climb up. As a result, demand for natural rubber increases, thus making it costly. At present, delay in shipping and increased freight rates have hindered imports. Additionally, the rise in international prices of rubber and the depreciation of the rupee have made NR imports unviable,’’ he said.

Russia-Ukraine war affects supply chain

Mounting consumption, following a recovery in the economy in the second half of FY22, led to increased imports this year.  NR import had slumped by 10 percent to 410,478 tonnes in FY21. This year, it has shown a 35 percent year-on-year (YoY) rise in April-January at 446,169 tonnes, as per Rubber Board data. But after the Russia-Ukraine conflict started, imports have been hit. However, this may reflect only in the coming month as import shipments that have been contracted earlier are reaching India now.

“The war has affected the entire supply chain of inputs like carbon black, synthetic rubber, steel etc., which may force us to realign our strategy.  Russia is a major producer of oil, and the country, along with Ukraine, account for 10 percent of global steel production. The impact could be felt in the next quarter,’’ said Ashish Pandey, VP, materials, JK Tyres.

According to him, in terms of sales volume, the second half of FY22 is better than the first half, though it is not as good as the second half of the previous year. ``Commercial OEM tyres have been lagging behind in sales for some time now and are due for correction,’’ he said.

The Rubber Board has targeted 8 lakh tonnes of NR production this year. “We are expecting it to fall in the range of 7.5 lakh to 7.8 lakh tonnes. Consumption, which was expected to touch 13 lakh tonnes, may also fall short and reach around 12.25 lakh tonnes because of the Omicron virus impact,’’ said K N Raghavan, ED, Rubber Board.

For the 10-month period of April-January 2022, production rose 8.6 percent at 658,000 tonnes while consumption increased by 17 percent to 10,21,000 tonnes, compared to the same period last year.