Natural rubber prices stablise after slipping from 6-year high

Natural rubber prices in India have come down from the six-year peak seen in November and are ruling stable, though a little lower than global rates.

According to the Rubber Board of India, the price of ribbed smoked sheet (RSS) four grade rubber, used by tyre manufacturers, is Rs 153 a kg against the nearly Rs 170 a kg in November.

In the global markets, prices for RSS-3, considered at par with India’s RSS-4, quoted at Rs 160.28 in Bangkok.

“Indian prices had moved up in tandem with global prices during October-November last year. They have stabilised now. During the last five years, global prices were invariably lower than domestic prices,” said Automotive Tyre Manufacturers Association (ATMA) Director-General Rajiv Buddraja.

Tyre-manufacturing companies account for 68 percent of the total rubber consumption in India. They have, of late, turned towards using technically specified rubber (TSR) grade ISNR-20 than RSS4.

Related stories

Subramani Mancombu

Journalist|Independent Journalist

• 
  India's sugar exports seen lower than last season on logistics woes
• 
  2 reasons why gold prices have been falling
• 
  Onion prices in India increase on January rains, exports hit as well

“Natural rubber prices have been moving sideways after rising to Rs 180-levels in November. Currently, global prices are averaging around Rs 161,” said United Planters Association of Southern India (UPASI) Vice-Chairman MP Cherian.

Rubber prices had run up as the Chinese economy recovered quicker than anticipated and production was disrupted in major producing countries such as Thailand, Malaysia, Indonesia and Vietnam.

“The novel coronavirus (COVID-19) pandemic affected rubber production as tappers in South-East Asia went back to their homes in Myanmar and Indonesia. In addition, floods in the region too affected production,” said rubber dealer N Radhakrishnan, who is also a former Cochin Rubber Merchants Association president.

ATMA’s Buddhraja said COVID-19 resulted in higher demand for latex for use in the medical industry by almost all countries. It led to a rise in consumption, though overall global consumption declined 7.9 percent.

“Rubber-producing nations like Thailand, Malaysia, Vietnam and Indonesia wanted to produce more automobiles and tyres. It led to more self-consumption and leaving a lower exportable surplus,” he said.

According to the Association of Natural Rubber Producing Countries, global production of natural rubber declined 8.3 percent year-on-year to 11.376 million tonnes during the first 11 months of 2020 (Jan-Nov).

The Rubber Board of India data showed that production picked up in November, thanks to the price uptrend, though it was down in the first seven months of the current fiscal.

Natural rubber production declined seven percent to 4.18 lakh tonnes during April-November this fiscal against 4.51 lakh tonnes during the year-ago period.

A 14 percent lower consumption kept the prices on a leash. During April-November, natural rubber consumption in the country dropped to 6.45 lakh tonnes against 7.53 lakh tonnes during the same period the previous year.

Imports, too, were lower by 24 percent at 2.51 lakh tonnes as tyre manufacturers and other rubber consuming industries had to shut or operate at low capacity due to COVID-19.

The ANPRC said in a statement that production might recover from this month.

The association said the development of vaccines to thwart coronavirus pandemic would be a game-changer and help the economy recover.

Rubber dealer Radhakrishnan said he did not expect prices to move up now.

Cherian concurred with the view. “Though going forward, the market looks bullish, there are two factors that are proving to be temporary hiccups now. The recurrence of the pandemic could dampen the economy, while the Chinese New Year will also slow demand,” he said.

New US President Joe Biden’s $1.9-trillion coronavirus relief plan could be a stimulus and good for everybody, including natural rubber, the UPASI official said.

Though going forward, the market looks bullish, there are two factors that are proving to be temporary hiccups now. The recurrence of the pandemic could dampen the economy, while the Chinese New Year will also slow demand.

-MP Cherian

Radhakrishnan said the price guarantee scheme announced by the Kerala government that fixed the production cost of natural rubber at Rs 170 a kg would help the growers.

On the other hand, growers in the Northeast whose production cost was lower were very happy with the price of Rs 150 a kg. “They were earlier happy when prices ruled at Rs 130-140 range,” Radhakrishnan said.

The northeastern parts, mainly Tripura and Assam, produce nearly one lakh tonnes of rubber annually.

Recently, ATMA and the commerce ministry embarked on an ambitious Rs 1,100-crore project to grow rubber on two lakh hectares in the Northeast.

(Subramani Ra Mancombu is a Chennai-based journalist who writes on commodities and agriculture)