Rubber Tumbles on Supply Gains, Concerns Over Tightening Rule

By Supunnabul Suwannakij and Jae Hur

April 30 (Bloomberg) -- Rubber plunged, sinking to its worst monthly performance since November 2008, as rules to slow overheating near-term contracts prompted some investors to unwind positions, and on speculation that supplies will improve.

Futures in Tokyo fell as much as 13 percent to 265.8 yen a kilogram ($2,823 a metric ton), the lowest level since Feb. 9. The most-active contract dropped for a third day, extending April’s loss to 5 percent. Keiko Koyama, spokeswoman for the Tokyo Commodity Exchange, confirmed the 265.8 yen level as today’s low.

“The scheduled increase in margins for the nearby May and June contracts triggered selling,” said Takaki Shigemoto, an analyst at research and investment company JSC Corp. in Tokyo.

Tocom, Japan’s biggest raw materials bourse, will impose additional margins for the two near-term rubber futures contracts from May 6. The extraordinary clearing margins will be 50,000 yen for the May contract and 25,000 yen for the June contract, the bourse said in a statement posted on its Web site on April 23.

These are in addition to the 100,000-yen initial margin. Investors also need to pay another 100,000 yen for the spot May contract, it said. Margins are the amount required by the exchange to cover any liability resulting from positions held by investors.

Market participants are concerned that “the exchange will impose tighter rules after increasing the margins to tackle the overheating of near-term contracts,” Shigemoto said.

The April-delivery contract jumped to a record 472 yen last week before settling at 455 yen on April 23. The May-delivery contract surged 20 percent in the six days through April 27.

October-delivery rubber, the most-active contract on the Tokyo Commodity Exchange, declined 4.2 percent to settle at 293 yen per kilogram.

Cutting Losses

Losses widened as “funds cut losses after the contract fell below a key support level of around 300 yen,” said Felix Yeo, a trading manager at the Singapore unit of Marubeni Corp.

“Position-squaring by investors ahead of the long holidays also pressure the market,” said Hiroyuki Kikukawa, general manager of research at Tokyo-based IDO Securities Co.

The Tokyo will be closed from May 3 to May 5 for the Golden Week holiday and resume trading on May 6.

Supply in key producing countries is expected to improve as the wintering season, when trees shed leaves and latex output slows, typically finishes at the end of April. “Supply will slowly improve,” said Yeo.

The free-on-board price, which excludes freight and insurance, of Thai RSS-3 grade rubber for May delivery remained unchanged at 129.55 baht ($4.01) per kilogram today, according to the Rubber Institute of Thailand. It touched a record 130.55 baht on April 28.

September-delivery rubber on the Shanghai Futures Exchange declined 0.8 percent to settle at 23,295 yuan ($3,412) a ton.

(businessweek.com)

To hike tyre prices by 3.5% on May 1: Ceat

Ceat has recorded a net profit of Rs 161.04 crore in FY10 against a loss of Rs 16.11 crore last year. The EPS for the year stood at Rs 47.03. The company has declared a dividend of Rs 4 per share. The topline of the company has also shown a smart improvement with net sales of Rs 2807.47 crore, recording a growth of 18.6% over last year.
PK Chowdhary, Managing Director of Ceat says that margins were under pressure in Q4FY10 due to high rubber prices. He feels that the margins in Q1 will continue to be under pressure. He further says that the company has not been able to pass on the higher rubber costs to consumers.
“The company will hike tyre prices by 3.5% on May 1.” Chowdhary says adding that original equipment manufacturers (OEMs) have agreed to absorb the hike in prices. The company will need price increase of atleast 15% to get back to healthy margins.
The company gives guidance of 38% growth in topline next year. Demand boost is from replacement market, exports and OEM, he adds.
Here is a verbatim transcript of an exclusive interview with PK Chowdhary on CNBC-TV18. Also watch the accompanying video.
Q: What the margin picture in Q4? Were they under pressure because of escalating rubber prices?
A: Margin was under pressure as rubber prices have been going very high and the resultant effect was that our profit before tax (PBT) came down to Rs 21.5 crore in Q4. For the full year, the PBT was at a very smart level of Rs 239 crore, but for the quarter it was low.
Q: What is the sequential slip been in your PBT quarter on quarter? What kinds of revenues have you booked for Q4?
A: In the Q1 and Q2 our PBT to net sale margin was close to about 12%. It slipped to around 4.5% in Q3 and now it has slipped to 2.9%. So there has been a slippage in Q3 and Q4. We expect this situation to remain for some more time because rubber prices continue to rule very high and we are not able to pass on fully to the extent of cost push to the customers.
The result is that the profit margins are under pressure and this situation is likely to prevail in Q1. On an overall basis, the margin for the whole year stood at a very smart level of 8% which was all time best for our company. Our profit also after tax of Rs 161 crore has been the highest ever that we met.

(moneycontrol.com)

Tyre cos worry over rubber supplies

Thiruvananthapuram: Rising demand has put tyre makers in a precarious situation as on one hand revenues are simultaneously increasing because of increased sales, but at the same time their raw material demand has stretched the already low natural rubber supplies.

With tyre production in the first 11 months of 2009-2010 financial year rising by 17%, purchase divisions of major tyre companies are grappling to meet the fast-expanding raw material needs, especially of natural natural rubber. “Some tyre companies have already passed on impact of rising input cost to consumers in January and March and it looks that some are poised to raise prices again in May,” Vaishali Jajoo, automobile analyst at Angel Broking said, adding that a way to fight input cost pressure is debottlenecking, which most tyre firms are already doing.

Tractor tyre demand, an indicator of rising purchasing power in rural economy, is the main factor behind increasing tyre production. Production of tractor front and tractor rear tyres went up by 30% and 24% respectively, according to the latest statistics released by Automotive Tyre Manufacturers Association (ATMA).

Tyre production touched 87.8 million units in the first 11 months of last financial year, a growth of 17% over 74.7 million units produced during the same period of previous financial year. Good monsoon this year could translate into better tractor tyre sales making tyre companies worry as to whether they will be able to procure adequate quantities of raw material.

“Rubber unavailability is likely to be a big roadblock to the growth momentum of tyre industry,” Neeraj Kanwar, Chairman ATMA said.

Tyre companies said that its not just the historic high price of Rs 170 per kg (more than 80% the average price of Rs 95 a Kg in April 2009) that’s worrying them, but sheer unavailability of natural rubber that is more critical.

Kanwar said, “growers are hoarding rubber and not selling as spot market prices are rising almost daily by Rs 2-3 per kg.” Tyre companies have also questioned the natural rubber production data compiled by state-run Rubber Board. “Its a mystery why the Board makes supply projections too pink to be true,” says Rajiv Budhraja, Director General, ATMA.

ATMA is gearing up to raise the issue of over-optimistic rubber production data at the board of directors meeting on May 12.

(financialexpress.com)

World rubber output to grow 6.2% in ’10

Thiruvananthapuram: Global rubber supply is likely to grow by 6.2% in 2010, according to the crop outlook report by Malaysia-based Association of Natural Rubber Producing Countries (ANRPC).

“From 8,821 million tonne in 2009, supply of natural rubber in ANRPC member countries is now anticipated to grow at a rate of 6.2% in 2010, touching 9,367 million tonne,” Djoko Said Damardjati, secretary-general, ANRPC said. ANRPC accounts for about 94% of the global supply of natural rubber.

Last year, world rubber supply had shrunk 3.6% to 8.821 million tonne, mainly due to Indonesia ‘s downward revision of stocks. “A faster-than-expected global economic recovery” and “resultant acceleration in natural rubber demand” are major drivers of rubber market in short and medium term, Djoko Said Damardjati said, in ANRPC’s April Bulletin.

Besides the rising consumption in China, India and Malaysia, a section of the tyre manufacturing industry, which have been shying from coming into the market in March and April, are expected to make a comeback from next week.

“They had postponed their purchases in expectation of comfortable availability after the wintering season,” the ANRPC Bulletin, that studies the trends in first quarter of 2010, to project the outlook for the whole year, showed.

Analysts indicate three key reasons, why the supply may not feed natural rubber demand is that age of existing yielding trees in major producing countries is likely to exert a downward pressure on average yield.

Secondly, higher number of small holdings in rubber limits flexibility to enhance yield by short-term measures and finally, rubber production already suffers from labour shortage.

As global economy gets back on its leg, creation of more opportunities in industrial and tertiary sectors is likely to aggravate the shortage of workers in rubber estates.

However, most analysts believe that in the long-term, there is no cause for pessimism. The net effect of two opposite processes would decide the supply from 2012 onwards.

(financialexpress.com)

Rubber Declines to One-Month Low as Debt Concerns Cut Appeal

By Aya Takada and Supunnabul Suwannakij

April 28 (Bloomberg) -- Rubber tumbled to a four-week low after credit-rating downgrades of Greece and Portugal stoked concern that debt-laden nations may be moving closer to default, prompting an increase in risk aversion among investors.

Futures in Tokyo fell 1.9 percent to 305.8 yen a kilogram ($3,278 a metric ton), the lowest closing price since March 25, extending a decline from a 21-month high of 338.5 yen reached on April 16 and heading for its worst monthly performance since September.

Asian stocks fell, extending a global rout, after the rating downgrades spurred concern Europe’s debt crisis may derail the global economic recovery.

“Rubber came under pressure along with other commodities as concern about European debt problems spurred investors to cut their holdings of risk assets,” Takaki Shigemoto, an analyst at research and investment company JSC Corp. in Tokyo, said today.

Greece’s credit rating was cut three steps to BB+, or junk, by Standard & Poor’s, the first time a euro member has lost its investment grade since the currency’s 1999 debut.

Standard & Poor’s also warned that bondholders could recover as little as 30 percent of their initial investment if the country restructures its debt. The Greek move came after the rating company reduced Portugal by two steps to A-.

“Concerns about European budget issues are increasing again and that’s discouraging people from putting their money into risky assets,” said Hiroichi Nishi, an equities manager at Nikko Cordial Securities Inc. in Tokyo. The MSCI Asia Pacific Index fell 1.6 percent to 125.11 as of 10:22 a.m. in Tokyo.

Rubber futures have gained 11 percent this year as the global economy recovered from the worst postwar recession, boosting raw material demand. The market was also supported by a seasonal decrease in supply from Thailand, the largest producer.

Cheaper Supplies

The free-on-board price, which excludes freight and insurance, of Thai RSS-3 grade rubber for May delivery fell to 130.05 baht ($4.03) per kilogram from a record 130.55 baht touched yesterday, according to the Rubber Institute of Thailand.

The auctioned price of RSS-3 fell 1.2 percent to 118.55 baht a kilogram as some buyers shifted to cheaper supplies from Indonesia, the institute said.

The rubber market will stay supported by a faster-than- expected global economic recovery and by accelerating growth in demand, the Association of Natural Rubber Producing Countries said in an April newsletter.

Natural rubber prices will remain high until at least June as supplies from the three biggest producing countries remain tight and demand for tires from automakers expands, Abdul Rasip Latiff, chief executive officer of the International Rubber Consortium Ltd., said in an interview yesterday.

The average physical price of natural rubber from Thailand, Indonesia and Malaysia will be about $3.20 to $3.30 per kilogram in the second quarter, “based on fundamentals,” Abdul Rasip said. The price has averaged $3.19 this year,

September-delivery rubber on the Shanghai Futures Exchange tumbled 2.3 percent to settle 23,385 yuan ($3,426) a ton.

(businessweek.com)

High input cost likely to send tyre prices north

Mumbai: Tyre manufacturers Bridgestone India, Apollo Tyres and Ceat are looking to raise prices. Over the last two quarters, rubber prices have risen 60-70% and are hovering at Rs 150 per kg. The tyre price increase will be the third in four months. Since January, tyre prices have gone up 8-10%.

Bridgestone India said it had increased prices by 3.5% (cost to the dealer) starting today. Hiromi Tanigawa, managing director, Bridgestone India Private Ltd, said:

“It will all depend upon the raw material prices. If there is an increase in the raw material prices, we will also increase our prices and pass on the burden further.” Apollo Tyres and Ceat plan an increase by May.

Rubber comprises 40% of the cost of a tyre. Any fluctuation in the commodity impacts the cost of production and margins of the makers, said a Mumbai-based analyst. “The makers have been of late increasing prices in tandem with the increase in the raw material prices,” she added. The makers have managed this on the back of strong demand in the market and supply-demand mismatch on the final product side.

“Tyre makers are operating at 100% capacity utilisation. Citing the hardening rubber prices, the margins of the tyre makers are expected to remain under pressure, but will smoothen up in the short-term,” said Vaishali Jajoo, an auto analyst with Angel Broking.

Auto makers like Mahindra & Mahindra (M&M) and Tata Motors, among others, have lately pointed out the mismatch in supply from component makers, specifically from tyre makers. Though they had hinted on the improving situation, there is still a long way before balance is maintained between supply and demand.

 (financialexpress.com)

Demand-driven bullish phase traps rubber

C.J. Punnathara
Kochi April 27
A faster than expected global economic recovery and the resultant acceleration in demand for natural rubber are likely to dominate sentiments in the global rubber markets in the short to medium-term. Also, global demand is likely to receive a further boost as a section of tyre manufacturing industry which stayed away during the wintering months are expected to re-enter expecting better availability in the coming months, the Association of Natural Rubber Producing Countries (ANRPC) has said.
Over 45 per cent of the global demand for rubber comes from China, India and Malaysia. The data on import and consumption of rubber in these countries during the first quarter this year reveal that natural rubber has already entered into a demand-driven bullish phase. While consumption in India rose 12.8 per cent, imports have soared by 124 per cent. More demand is expected in the months to come as the installed capacity to manufacture bus and truck tyres is poised to more than double, the Automotive Tyre Manufactures Association has pointed out.
“The likelihood of prices slipping this year is quite remote. In fact, as demand firms up in the months to come, prices are likely to improve further in the coming days.
Indications are that global spot prices could breach the $4-mark in the not-too-distant future” said Mr N. Radhakrishnan, former President of the Cochin Rubber Merchants Association.
Consumption in China increased 29 per cent during the first quarter, while natural rubber imports soared 70 per cent. Malaysia has posted 13 per cent growth in consumption, while imports rose 28 per cent.
Like India, Malaysia is also fast becoming a net importer of natural rubber. Preliminary indications are that Malaysia imported 1,83,000 tonnes of rubber in first quarter.
In the days to come, Malaysian demand is likely to be fuelled by greater demand from the domestic glove industry as the US has stepped up its health bill by $ 940 billion.
Global production
Even as consumption and imports into the major-consuming countries have registered double-digit growth, global production is expected to rise moderately by 6.2 per cent during the current year, the ANRPC that accounts for 94 per cent of the global production and supply of natural rubber said. However, this is better than the 3.6 per cent fall recorded last year.
Global production is expected to rise modestly from 8.821 million tonnes (mt) in 2009 to 9.367 mt in 2010. Most countries, including India, expect a moderate increase in production, while Malaysia alone expects production to grow faster by 16 per cent. Increased production is expected from growth in yielding area under rubber. Yielding area in India is expected to go up by 6,000 hectares, while China is expected to record a growth of 22,000 hectares, Vietnam (23,000 hectares) and Cambodia (10,000 hectares).
Labour shortage is not only becoming rampant in the growing regions of South India but is also extending to countries such as Malaysia. ANRPC reported that 85,000 hectares of mature rubber area which are lying untapped in Malaysia are now being tapped as prices have risen to all-time highs.
Although availability usually improves in April after the winter dormancy, the Association pointed out that it could be different this year. As prices have remained high, farmers have not been cutting down old trees and replanting with improved varieties in recent years and this is likely to affect the yield this year as well.
Limited options
Moreover, farmers have limited options of increasing yield as high prices had ensured that they extracted the maximum yield from their trees. Finally, consumers who have stayed away from the market in the past couple of months on account of high prices and low arrivals are likely to re-enter the market and prices could firm up further.

(thehindubusinessline.com)

China sells 30,000 T rubber reserves, more sales seen

BEIJING, April 27 - China has sold 30,000 tonnes of natural rubber from state reserves at an open bidding last week, the National Development and Reform Commission said on Tuesday.

The amount of rubber was bought by 26 companies at prices between 23,600-24,840 yuan ($3,457-$3,639) per tonne, the commission said at a report on its website (www.ndrc.gov.cn.)

Traders said the government was likely to release more from state reserves in an effort to stabilise domestic prices.

China, the world's largest rubber consumer, imported 193,829 tonnes of natural rubber in March. Imports in the first quarter of the year rose 30.3 percent on year to 490,452 tonnes, driven by strong demand from its automobile industry.

Shanghai natural rubber contracts traded lower in the morning. The most-active Sept 2010 contract was traded 2.4 percent lower or at 23,945 yuan per tonne in the morning session.

(news.alibaba.com)

India rubber seen steady on firm overseas cues

MUMBAI, April 26 (Reuters) - Indian rubber prices, which hit record highs last week, are likely to remain steady this week as firmness in overseas market is seen offsetting weak spot demand from tyre makers due to higher prices, analysts said.

"Demand is weak compared to last week. Market is expecting improvement in arrivals in next few weeks due to recent rainfall in Kerala," said Shiji Abraham, analyst with JRG Wealth Management.

India's rubber production is likely to rise by 7.5 percent to 893,000 tonnes in 2010/11 helping reduce costlier imports, a senior Rubber Board official said last week.

The benchmark June contract NMRUM0 on the National Multi-Commodity Exchange (NMCE) provisionally closed down 0.3 percent at 17,168 rupees per 100 kg, after hitting a contract high of 17,600 last week.

Spot price of the most traded RSS-4 rubber (ribbed smoked sheet) rose by 100 rupees to 16,850 rupees in Kottayam, Kerala, on Monday, Rubber Board data showed.

The price had hit a record high of 16,950 rupees last week. Firmness in overseas market due to tight supplies will support prices, analysts said.

High demand for rubber means physical supply will remain tight even when tapping gets into full swing in Thailand in May, and Thai RSS3 may stay above $3.50 per kg until June, a senior industry official said on Monday. See [ID:nSGE63P0HA]

Tokyo rubber futures rose on Monday, supported by tight supply, a weaker yen and rising oil prices. See [ID: nTOE63P040]

In India, sales of vehicles -- including cars, utility vehicles, trucks, buses, motorcycles and scooters -- jumped an annual 26.4 percent in 2009/10 to 12.3 million units, data from Society of Indian Automobile Manufacturers (SIAM) showed.

(in.reuters.com)

Rubber prices reach new highs

Rise in global demand, tight supply among factors

PETALING JAYA: Rubber is one of the hottest commodities traded so far this year with price rallies seen in most international rubber exchanges.

Tyre-grade Standard Malaysian Rubber (SMR 20) has also been hitting new highs particularly in the past three months and currently trading above the RM10,600 per tonne level.

According to Association of Natural Rubber Producing Countries (ANRPC) director-general Prof Djoko Said Damardjati, tightness in rubber supply would remain an issue amid an upsurge in demand from China and India for their booming auto and tyre manufacturing industries.

“Severe drought, the current wintering season as well as active replanting activities in most major producing countries could affect rubber output.

“Even the preliminary estimates from members of ANRPC indicate that the global rubber supply is unlikely to rise above 6% this year,” he told StarBiz recently.

ANRPC had earlier estimate that global rubber production could reach 9.5 milllion tonnes this year, up by about 6.3% from last year’s 8.9 million tonnes.

Djoko also expected rubber supply to remain tight until 2011. A large extent of existing yielding trees in major producing countries were planted in 1980s.

“Most of the trees planted have reached declining yield phase, thus the age composition of the existing yielding area is unfavourable for yield improvement,” he added.

Djoko noted that Indonesia and Malaysia had undertaken active replanting activities since 2005.

“I believe rubber prices will remain firm for quite some time until supply recovers, possibly by early 2012.”

Apart from the buoyant demand and drought-ridden supply, he said other factors influencing the rubber market included the weakening US dollar, volatility in yen and the increasing crude oil prices.

Members of the ANRPC countries account for about 94% of the total world natural rubber production.

Interestingly, more than 45% of global consumption of natural rubber is in China, India and Malaysia, which are the major consuming countries in the ANRPC.

ANRPC in its latest report said imports from China during January to February surged 63% for natural rubber and 118% for compound rubber compared with the same period last year.

During the same period, India posted a 17% increase in natural rubber consumption, given the large-scale capacity in its auto tyre manufacturing operation.

Meanwhile, Hwang DBS Vickers Research has also raised its 2010-2012 forecast rubber prices by 39% to 44% as its previous forecasts had not taken into account the price recovery on the back of stronger crude oil prices.

The brokerage said: “We believe strong demand recovery for the automotive sector in China and supply constraint due to ongoing conversions to oil palm and the wintering season between February and April would contribute to the jump in rubber prices.Our assumptions are factoring in 29% lower prices in the second half of 2010 compared with the first half.”

One analyst with a local stockbroking firm said the recent automobile industry statistics unveiled that the pick-up in the auto sector in China and the United States had been strong.

The automobile industry is the single biggest user of latex, easily consuming about 70% of the world latex production.

While some might argue that the price upsurge could be short-term given the traditional low supply wintering season, however, many feel that the current price hike was a reflection of strong demand.

“Even with a possible price reduction down the line, natural rubber prices are unlikely to ease to the low levels of December 2008 and January 2009,” he added.

(biz.thestar.com.my)

More rubber farmers to be encouraged

The Office of the Rubber Replanting Aid Fund (ORRAF) plans to groom 12,000 para rubber xperts over the next four years to support expansion plans and cope with an expected industry boom.

These rubber experts, or mor yang in Thai, will help instruct new planters and train them in how to grow and tap the trees in addition to processing for various rubber products.

Director-general Wit Pratuckchai said the Office planned to launch the second phase of its initiative to expand plantations, with a target of 800,000 rai in new growing areas by 2012.

The first 100,000 rai are planned for this year, 300,000 next year, and 400,000 rai in 2012. About 550,000 rai are in the Northeast region, with the rest spread over the North and central provinces.

As a para rubber tree takes seven years to mature for harvest, he expects thenewfields will increase natural rubber supply by 224,000 tonnes per year from 2017.

The Office has 3.97 billion baht to fund the project, with 2.82 million for saplings, fertiliser and other essentials over the first three years. About 800 million baht will be used for training and 350 million for management.

The second phase has been scaled down from an initial one million rai, following a first-phase planting of one million rai from 2004-06.

The expansion follows the ORRAF's goal to add between 80,000 and 160,000 new rubber planters. The policy targets small planters with 2-15 rai of land, and it is expected to earn each ofthemaminimumof 112,000 baht per year, based on rubber prices of 100 baht per kilogramme.

The Office is confident the industry's bright outlook will attract new growers though many of them have no experience in rubber growing, which is typically more popular in the South.

''We have 120 staffwhowill train the first 1,200 rubber experts starting next month,'' he said.

The trainees from villages and farm co-operatives will undergo a threemonth course on anagement to support the growing industry.

Strong demand from the automobile industry due to the global recovery as well as market peculation have driven rubber prices to record highs. Ribbed smoked rubber sheets (RSS3) for ay delivery reached 128 baht a kilogramme this week, more than double the 57-baht average in the same period of 2009.

Although the industry is booming, Mr Wit cautions planters to carefully manage their supply to minimise risk. Extremely high prices could fluctuate from speculation, leading to default risk on orders by exporters.

Planters will be happy with 80 to 100 baht per kg, considering 50-60 baht for production costs, he said.

(bangkokpost.com)

Sri Lankan rubber prices hit all time high

Sri Lankan rubber prices gained an all time high at the Colombo auctions on Tuesday with a kilogram of rubber fetching Rs 450, rubber brokers said.

Latex crepe rubber produced at Arapolakande Estate, managed by Kotagala Plantations PLC, Elpitiya estate managed by Elpitiya Plantations PLC and Galutura and Rambukkande estates managed by Balangoda Plantations PLC fetched these high prices.

The RSS1 grade rubber produced at Mahawela, Rambukkande and Paradise estates managed by Balangoda Plantations PLC and Bentota estate managed by Elpitiya Plantations PLC together with Neerawalangala estate managed by a private owner fetched the highest price of Rs. 450 per kilogram at the same auction. M. Dias, Chairman of J.D &Sons (Pvt) Ltd, a rubber broker, told the Business Times that the rubber prices will remain at the Rs. 400 level for some time and the industry will improve further to bring more foreign exchange to the country. Sri Lanka exports only white crepe rubber which has a good demand in the world market, he added.

Meanwhile Malwatte Valley Plantations said it also obtained a record price of Rs 450 for its centrifuged rubber latex manufactured at its Vincent estate in Avissawella. It said the company’s entire production of rubber till the first of the financial year ending June 2010 have been sold at the current, rising prices.

(sundaytimes.lk)

Higher prices seen for TOCOM rubber contract -traders

* April contract expires at record price for spot contract

* Massive buy-back into expiry triggers CBs, ups volatility

* Spike in spot contract price spreads across contracts

* For a technical view on TOCOM rubber, see [ID:nSGE63M0CY] (Adds technical analysis, background, quotes)

By Chikako Mogi

TOKYO, April 23 (Reuters) - Tokyo rubber futures are expected to continue to gain on tight physical supply, strong demand from China and lower cost compared to spot physical prices, traders said on Friday.

The spot April contract, which expired Friday, rose as high as 472 yen, the highest ever for any spot contract, and which pulled up nearby contracts. [ID:nSGE63M0A5]

The sharp gain led the Tokyo Commodity Exchange to investigate recent price volatility in rubber futures.

"Given the recent sharp moves in rubber prices, we are talking to members of the exchange to find out what has caused the recent volatility and checking open interest," a TOCOM spokesman said. [ID:nTOE63M04O]

On the physical market, Thai RSS3 was offered at a record high of $4.10 per kg earlier this month. TOCOM's May contract rose as far as 409 yen ($4.38) on Friday, but the next nearby contract for June delivery and beyond, hovering around 355 yen ($3.80), still makes Tokyo look cheap for overseas buyers.

Japan's largest commodity exchange, which lists gold, platinum, rubber and other industrial commodity futures, conducts such hearings when price actions appear excessive, though so far it has found no irregularities, the spokesman said.

But bets on prices falling, despite the rise in physical prices which pulled futures higher, were left uncovered until the very last minute and raised concerns about whether some commodity brokerages have failed to properly educate general investors about the practices of delivery, some traders said.

Other traders however pointed to a fundamental reason of tight supply for the spike in prices as weather conditions in top producer Thailand remain unfavourable.

"By mid-week this week, concerns about failed deliveries disappeared. It was fortunate that some hedgers unloaded their long positions so short sellers could buy back and close their positions and bail out of the market, at a huge loss," said a dealer at a Japanese commodity brokerage.

"But there are concerns about next month and beyond, given that prices have risen by more than 100 yen in the past month and supplies remain tight," the dealer said.

Shipments from Thailand to Japan have been delayed, making commodities brokerages reluctant to let go of their rubber holdings in Tokyo, where futures prices are still well below that of physical prices, even with the recent market spike, a dealer at another commodities trading house said.

An internal rule by TOCOM says on the 15th of the month, brokers are advised to remind their customers about delivery on spot contracts, traders said.

"If you were short selling, you should know this and should have closed your positions. Those who held their positions open until the end either took market volatility lightly or were not properly advised by brokerage houses," one dealer said.

Japan's crude rubber inventories totalled 6,477 tonnes as of March 31, down 10.3 percent from 10 days earlier, falling steadily from 8,222 tonnes as of Feb. 28, the highest level since July 20, and approaching a record low of 3,902 tonnes on Nov. 10. [ID:nTOE63E08K]

The drawdown in inventories reflects Japan's exports to China, which imported 28,606 tonnes of synthetic rubber from Japan in March, up 60.84 percent from a year earlier. [ID:nEAP001316]

The outlook for continued tight supply WILL ALSO KEEP INTENSIVE UPWARD PRESSURES ON NEARBY FUTURES CONTRACTS as short sellers will have to buy back the spot contract before its expiry, otherwise they will need to deliver the raw material.

"The fundamental issue here is the tight supply, keeping the negative spread for a while until seasonal factors in producer countries normalise," said Hiroyuki Kikukawa, general manager at Nihon Unicom.

But given that commodities prices generally tend to tread higher into the summer, the resumption in rubber tapping may not have much of a cooling effect on prices, he added. ($1=93.44 Yen)

(in.reuters.com)

Record rubber turnover at NMCE:Crosses Rs.200cr

AHMEDABAD (Commodity Online): India’s leading commodity bourse in rubber futures, National Multi-Commodity Exchange (NMCE) has recorded highest single-day turnover in rubber futures on April 21, 2010, when the rubber turnover on the exchange crossed Rs.200 crore mark for the first time ending the day with a total turnover of Rs.207.77 crore, highest since the launch of the contract. 

In a statement issued on Friday, the exchange informed that rubber turnover at NMCE had crossed Rs.200 crores touching Rs.207.77 crores on April 21, 2010, with total traded volume of 12,010 MT with open interest of 8,516 MT. “All stake holders the producers, the cooperative societies, the investors who work on cash & carry, the tyre industry, other consuming industry, have all participated, which is giving very healthy sign. This is a grand achievement, highest ever since the launch of the contract. Earlier the highest turnover was on 26th December 2006 and it was at 189.8 Cr. 

Commenting on the development, Anil Mishra, CEO, NMCE informed that the trading volume recorded high despite rubber production undergoing wintering season. A wintering season is the season when rubber trees shed their leaves and as a result tapping of rubber comes down. ““The price of Rubber has been very high due to lower global supply as a result of non conducive weather on the one hand and increased demand on the other. While the demand was burgeoning due to stimulus package and revival of the auto sector, supply was not able to keep pace. Good price is encouraging the farmers to tap as much as possible,” said Mishra adding that the producers now should not hold back their produce and take the advantage of huge price upswing. 

Producers have kept their rubber in NMCE warehouses and taken funding from the bank against warehouse receipt. NMCE has presently about 7000 MT of Rubber stock in the warehouses at Aluva, Kozhikode, Ernakulum, Kakkanad, Thrissur, Kakkancherry and Pallakad, the exchange stated. 

According to Mishra, it was the low tapping season. “NMCE's increased efforts of sensitization of all the stakeholders are showing good result and now all the stakeholders have understood the need of hedging their price risk in rubber,” Mishra commented. 

(commodityonline.com)

Rubber, Little Changed, May Gain on Tight Supply in Thailand

By Aya Takada

April 23 (Bloomberg) -- Rubber, little changed, may rise as tight supply in Thailand, the world’s largest exporter, drove the nearest-dated contract on the Tokyo Commodity Exchange to a record.

September-delivery rubber, the most-active contract, gained as much as 0.5 percent. The April-delivery contract, which expires today, jumped as much as 4.9 percent to 472 yen, the highest-ever price for a nearby contract.

“A seasonal decrease in supply from Thailand gives support to futures,” Hisaaki Tasaka, an analyst at Tokyo-based commodity broker ACE Koeki Co., said today. “The market may remain buoyant until Thai shipments start picking up as early as June.”

September-delivery rubber has fallen 4.9 percent this week and was little changed at 318.1 yen per kilogram ($3,407 a metric ton) at 12:36 p.m. in Tokyo. The price earlier dropped as much as 0.7 percent and is headed for the biggest decline since the week ended Jan. 29.

Gains were limited as a stronger dollar sapped demand for commodities as alternative investments, Tasaka said.

The dollar climbed to near the highest in a year against the euro on concern Greece’s larger-than-estimated debt will prompt the nation to take a bailout, damping demand for the region’s assets. The European Union lifted its estimate for Greece’s deficit and Moody’s Investors Service cut the nation’s debt rating.

April-delivery rubber was unchanged at 450 yen by 12:37 p.m. local time after rising to a record at 472 yen. Speculators with short positions in April futures have to buy back the contract today or the raw material will be delivered.

Exchange Probe

The price of the April contract surged 37 percent this month. The Tokyo exchange checked its members’ positions in rubber futures after volatility jumped this week, Kazunari Hayakawa, executive managing officer for the exchange, said in an interview yesterday.

Thailand is in the wintering season from February to April, when rubber trees shed their leaves and latex output slows, diminishing supplies of the commodity used in tires.

Supply from the country is expected to increase as it nears the end of a low-production season, according to Navarat Kaewpratarn, senior marketing official at Future Agri Trade Co.

The free-on-board price, excluding freight and insurance, of Thai RSS-3 grade rubber for May delivery was at a record 128.05 baht ($3.98) per kilogram yesterday, according to the Rubber Institute of Thailand.

September-delivery rubber on the Shanghai Futures Exchange added 0.6 percent to 24,410 yuan ($3,576) a ton at the 11:30 a.m. local time break.

(businessweek.com)

India's Natural Rubber Production to Rise 8.45%

22 April 2010 – India’s natural rubber (NR) production is likely to rise 8.45% to 901,680 tonnes in the current fiscal year 2010-11 compared with 831,400 tonnes for the fiscal year 2009-10, according to a projection by the Rubber Board of India.

If this projection materialized, this will be the first time that the natural rubber production of the fourth largest producer in the world, after Thailand, Indonesia and Malaysia will cross the 900,000 tonnes mark.

For the fiscal year 2010-11, the additional increase in production will be 70,280 tonnes as compared to a fall of 33,100 tonnes in the fiscal year 2009-10. Total production for the fiscal year 2008-09 was 864,500 tonnes.

In the case of consumption, a lower growth is projected. Total consumption is projected at 986,980 tonnes, an increase of 56,395 tonnes or 6.8% from the fiscal year 2009-10 figure of 930,585 tonnes. Total consumption for the fiscal year 2008-09 was 871,720 tonnes.

Lower domestic supplies due to bad weather and robust demand from tyre makers had forced India to more than double its natural rubber imports the previous year from 78,000 tonnes to more than 170,000 tonnes, which pushed up prices to historic records. Improvement in production this year is likely to bring down imports to pre-2009-10 level.

(irco.biz)

IRCo's WEEKLY MARKET SNAPSHOT: 12 - 16 April 2010

IRCo's DCP charted another record high on 15 April when it breached the 350 US cents/kg. level. During the week under review, it recorded a 1.48 US cents/kg. gain amidst continuing tight supplies in the physical market and gains in the futures markets, except on the Shanghai Futures Exchange.

China, after having sold 30,000 tonnes from its reserve of natural rubber on 14 April, announced on 16 April that it will sell another 30,000 tonnes from the reserve on 23 April in a further bid to mitigate the high prices and pressure from tight supplies.

Thai RSS 3 was quoted at a record high of US $ 4.10/kg. on 16 April, although there was no report of trade done at that level. Thailand had a long Songkran New Year's holidays from 13-15 April with an added government declared holiday on 16 April.

(Irco.biz)

Natural rubber output likely to rise 8.45%

The Rubber Board has projected an increase of 8.45 per cent in the country’s natural rubber (NR) output for the current financial year. According to board’s projection, the total production this year would be 901,680 tonnes compared with 831,400 tonnes last year.

This will be the first time that the natural rubber production will cross the 900,000-tonne mark.

The incremental increase for FY11 will be 70,280 tonnes as against a fall of 33,100 tonnes in 2009-10. The board estimates a marginally lower growth in the case of consumption, as it estimates total consumption of 986,980 tonnes for the current financial year.

The consumption is projected to grow by 56,395 tonnes in the current year. In 2009-10, consumption increased 6.8 per cent at 930,585 tonnes as against 871,720 tonnes in 2008-09.

Meanwhile, Automotive Tyre Manufacturers Association (Atma) has questioned the rationale behind projections.

An analysis of Rubber Board Data shows an average incremental growth in production of only 21,000 tonnes a year over the last 10 years (FY01 to FY10).

A study of the Association of Natural Rubber Producing Countries (ANRPC) put the projected production of NR in India in the year 2010 at 853,000 tonnes, the same as production in the year 2006.

“With new capacities being put up by tyre manufacturers in the country to meet the rising demand from vehicle makers, the NR consumption will grow spirally. The decrease in incremental consumption as estimated by the board is most unfortunate and belie the growing requirements from consuming interests”, said Neeraj Kanwar, chairman, Atma.

(business-standard.com)

Tokyo Exchange Checks Rubber Positions for Price Manipulation

By Aya Takada and Yasumasa Song

April 22 (Bloomberg) -- The Tokyo Commodity Exchange, which provides the benchmark price for natural rubber, is checking futures positions held by its members after the volatility of prices jumped.

“We have checked with every commodity brokerage company about how many long positions they hold in contracts for delivery in April, May and June,” Kazunari Hayakawa, executive managing officer for the exchange, said today by phone. “We need to check whether any price manipulation is occurring.”

September-delivery rubber, the most-active futures contract in the exchange, fell as much as 4.3 percent today after surging by 4 percent in the previous two days.

(businessweek.com)

India's 2010/11 rubber output seen up 7.5 pct

By Rajendra Jadhav

MUMBAI, April 21 (Reuters) - India's rubber production is likely to rise by 7.5 percent to 893,000 tonnes in 2010/11 helping reduce costlier imports, a senior Rubber Board official said on Wednesday.

"Last year production was down due to bad weather. Now conditions are better. We are estimating higher production," the official, who declined to be named, told Reuters.

The Rubber Board is a statutory body constituted by federal government, under the Rubber Act 1947, for the overall development of the rubber industry in the country.

In 2009/10, the country had produced 831,000 tonnes of rubber, down from 864,500 tonnes a year ago, he said.

But analysts and Kerala-based spot traders were sceptical about the projected jump in production in 2010/11.

"Yes, production will rise this year. But I am not expecting it to rise by 62,000 tonnes. Around 20-25,000 tonnes rise is possible," said Shiji Abraham, analyst with JRG Wealth Management.

Lower domestic supplies and robust demand from tyre makers had forced India to more than double rubber imports last year and pushed up prices to a record.

But improvement in production may cut 2010/11 rubber imports to 70,000 tonnes from 171,000 tonnes a year ago, the board official said.

Market participants said rubber prices, which hit record highs on Wednesday, are unlikely to fall drastically as consumption is also rising in the world's fourth biggest rubber producer.

The consumption for 2010/11 is pegged at 978,000 tonnes, up 5 percent compared to 931,000 tonnes a year ago.

The benchmark June contract NMRUM0 on the National Multi-Commodity Exchange (NMCE) hit a record peak of 17,600 on Wednesday, the highest level for second month contract since futures trade was introduced in 2003.

Spot price of the most traded RSS-4 rubber (ribbed smoked sheet) hit a record high of 16,950 rupees in Kottayam, Kerala, on Wednesday, as per data compiled by the Rubber Board.

In India, sales of vehicles -- including cars, utility vehicles, trucks, buses, motorcycles and scooters -- jumped an annual 26.4 percent in 2009/10 to 12.3 million units, data from Society of Indian Automobile Manufacturers (SIAM) showed.

The South Asian country's rubber exports in the current year are likely to double to 50,000 tonnes, the official said. 

(in.reuters.com)

China to Sell another 30,000 tonnes of NR from Its Reserves

19 April 2010 - China will sell another 30,000 tonnes of natural rubber from its reserves on 23 April 2010, after having sold 30,000 tonnes on 14 April 2010, according to an announcement made by the State Reserve Bureau.

This is seen as furthering the earlier the move by the Chinese government to mitigate the current high rubber prices and pressure from tight supplies domestically and from the Southeast Asian producing countries which are now experiencing low production due to the seasonal dry wintering.

China imported 300,000 tons of natural rubber worth US $ 758.092 million for the first two month of 2010, which was 6 percent more, year on year.

Latest data from the General Administration of Customs indicated that China’s natural rubber import for March 2010 was 190,000 tonnes, 46.15 percent more than the 130,000 tonnes imported in February

(irco.biz)

Rubber May Drop 22% as Rally ‘Too Far, Too Fast’

By Aya Takada and Yasumasa Song

April 20 (Bloomberg) -- Rubber prices may drop as much as 22 percent by the end of 2010 as this month’s rally to a record was too steep for tire makers, said an official at Marubeni Corp., Japan’s largest trader of the commodity.

The benchmark cash price may range from $3 to $3.70 a kilogram in the second half of the year, from a record $3.85 yesterday, Kazutaka Sonomoto, manager at Marubeni’s rubber section, said in an interview.

Rubber surged to a record this month as Thailand, the world’s largest producer and exporter, entered a seasonal low- output period, reducing supplies amid a jump in demand from Chinese tire makers. The most-active futures contract on the Tokyo Commodity Exchange climbed to a 21-month high on April 16, while the immediate-delivery contract surged to a record today.

“The latest rally was too far, too fast,” Sonomoto said yesterday in Tokyo. “Tire makers with technological know-how will probably shift to synthetic rubber” or other cheaper alternatives, he said.

Rising prices have slowed natural rubber purchases by China, the world’s largest consumer, said Takaki Shigemoto, an analyst at research and investment company JSC Corp. in Tokyo. Buyers are “not in a rush to purchase,” he said by phone today.

Chinese synthetic rubber imports jumped to a record 182,570 tons last month, according to customs data. Natural rubber inventories monitored by the Shanghai Futures Exchange have plunged 68 percent since reaching a five-year high in January.

Synthetic Rubber

The price of synthetic rubber, which typically moves in line with crude oil, is about $2,500 a ton, Sonomoto said yesterday. That compares with $3,501 a ton for the most-active natural rubber contract in Tokyo today.

“Tire makers cannot increase the prices of their products as rapidly as the rally in the rubber market,” he said, because the gap between rubber prices and affordable levels for end- users is widening, he said.

Prices may also come under pressure if the world’s fastest- growing major economy allows the yuan to appreciate against the dollar, Sonomoto said.

Futures price movements in Shanghai, the world’s most- active rubber market in terms of trading volume, are becoming more influential on other markets, including Tocom, he said.

“If China revalues the yuan, the action will likely put a drag on Shanghai futures, leading to sales of rubber in Tokyo and other markets,” he said. Tocom provides the global benchmark for rubber prices as the market, unlike Shanghai, is open to hedgers and speculators from any country.

Yuan Appreciation

China may allow the yuan to appreciate by June 30 to curb inflation while avoiding a one-time jump in value that might endanger export jobs, a survey showed this month.

Twelve of 19 respondents surveyed by Bloomberg said the central bank will allow the currency to float more freely this quarter, five expect it to happen by Sept. 30, and the rest see the move by year-end.

Global tire production is expected to grow by 3 percent to 5 percent a year, led by rising car sales in China, the world’s largest vehicle market, Sonomoto said.

“Chinese rubber demand will keep expanding as per-capita car ownership in the country may increase to the level of Japan,” he said.

China’s natural rubber consumption is forecast to grow 10 percent from last year to 3.35 million metric tons, according to a report issued last month by the Association of Natural Rubber Producing Countries.

Rubber Prices

The free-on-board price, or price excluding freight and insurance, of May-delivery Thai ribbed smoked sheet, the grade traded in Tokyo, rose to a record 124.30 baht ($3.85) per kilogram yesterday, according to the Rubber Institute of Thailand. Prices in Indonesia, the second-largest producer, jumped to the highest since 2008 this year, Rubber Association of Indonesia Chairman Asril Sutan Amir said April 16.

Rubber for September delivery on Tocom gained 3.1percent to 322.7 yen a kilogram ($3,480 a ton). The price has dropped 5 percent since reaching a 21-month high of 338.5 yen on April 16. April-delivery rubber on Tocom surged 10 percent to a record 440 yen per kilogram.

September-delivery rubber on the Shanghai Futures Exchange climbed 1.7 percent to 24,735 yuan a ton.

(businessweek.com)

Apollo Tyres Plans to Raise Prices as Rubber Surges

By Subramaniam Sharma

April 21 (Bloomberg) -- Apollo Tyres Ltd., India’s biggest tiremaker by market value, plans to raise prices to partly offset rubber costs that have surged to a record on rising Chinese demand and lower output of the raw material in Thailand.

The company will increase prices by about 7 percent as early as May and then consider further gains depending on rubber costs, Neeraj Kanwar, 38, vice chairman and managing director, said in an interview yesterday in Gurgaon, where Apollo is based.

Apollo and its rivals face rising pressure to maintain margins as rubber futures rose to a record. Tiremakers may have to accept narrower profit or risk losing customers if they increase prices too fast, said Surjit Singh Arora, an analyst at Prabhudas Lilladher Ltd. in Mumbai.

“In one go, tire companies can take a maximum 4 to 5 percent price increase because of the competitive landscape,” said Arora, who has an “accumulate” rating on Apollo stock. “Margins of tire makers should be impacted for the next two quarters even if they increase prices.”

Rubber prices have jumped about 18 percent since the start of 2010, based on the benchmark futures contract on the Tokyo Commodity Exchange, while Apollo has increased product prices about 7 percent. Auctioned prices of Thai RSS-3 grade rubber reached a record of 121.27 baht per kilogram yesterday, the Rubber Institute of Thailand said on its Web site.

“There is no way I can absorb such huge jumps,” in rubber prices, said Kanwar. “How much of it can I pass on, how much can I absorb, that is the balance as a company we have to play.”

Shares of Apollo Tyres gained 3 percent to 76.75 rupees at 10:09 a.m. in Mumbai. They rose as much as 5 percent, the most in two weeks, earlier today.

Production Costs

Raw materials account for 70 percent of the production cost of tires, according to the India-based Automotive Tyre Manufacturers’ Association. Rubber accounts for 42 percent of the total raw material cost.

Apollo’s profit, excluding subsidiaries, rose nineteen-fold to 1.02 billion rupees ($23 million) in the three months ended Dec. 31 from 55.1 million rupees. Sales rose 46 percent to 13.2 billion rupees.

Apollo Tyres also plans to change its product mix and sell more of its higher margin radial tires for passenger cars, trucks and SUVs, Kanwar said. It’s also considering importing rubber duty-free, equivalent to the amount of products it exports, he said.

The company’s new factory near India’s southern city of Chennai has started operations and will reach capacity of 500 tons a day, or 6,000 radial tires for trucks and 16,000 for passenger cars, in the quarter ending March 31, 2011, Kanwar said. It will reach half that capacity by September, he said.

Duty-Free Imports

Apollo, set up in 1975, gets about 85 percent of its sales from customers replacing their old tires, and the remainder from selling directly to vehicle makers, the company said in a presentation to investors in March. Tires for trucks accounts for 56 percent of its sales, car tires makes up 32 percent and tractors and other vehicles account for the remainder, it said.

April-delivery rubber futures on the National Commodity & Derivatives Exchange Ltd. in Mumbai gained 0.6 percent to 169.22 rupees a kilogram yesterday.

Tire makers in India last month wrote to Prime Minister Manmohan Singh seeking duty-free imports of at least 200,000 metric tons of rubber and a cut in the import tax on the commodity to 7.5 percent from 20 percent, according to Kanwar, who is also chairman of the Automotive Tyre Manufacturers’ Association.

The group met Commerce Minister Anand Sharma and is waiting to be called by the prime minister for a meeting, Kanwar said.

“The government has to intervene because this commodity is going through the roof,” Kanwar said. Rubber futures may rise to as much as 200 rupees a kilogram, while the price would need to drop to 120 rupees a kilogram, “for me to get a respite,” Kanwar said.

(businessweek.com)

JK Tyre to raise prices by 3-5 pc from May 1: Official

MUMBAI: JK Tyre and Industries will increase tyre prices by 3 to 5 per cent from May 1, but that still would not be enough to counter the sharp surge in rubber prices, a senior official said. 

"I can tell you that from May 1 I am increasing the prices. We will have to think again in June," A S Mehta, director-marketing, said on Tuesday. 

Indian rubber prices had hit a record high of Rs 16,950 on Saturday, forcing the increase, he said. 

"I would say if rubber continues at these levels, there would be a series of price increases by the industry," Mehta said.

(economictimes.indiatimes.com)

Rubber has equal importance to M'sia as palm oil

RUBBER has equal strategic importance as palm oil to Malaysia.

Its cultivation is no longer for latex alone but other purposes, leading to the establishment of a multi-billion ringgit integrated rubber industry.

The growing versatility of the crop – from latex for tyre and glove manufacturing to rubberwood for furniture making – has driven Malaysia to activate its replanting programmes and allocate more funds to beef up existing rubber growing zones in Peninsular Malaysia.

It has also lead to the opening of new and larger planting hectarage in Sabah and Sarawak, totalling 30,000ha under the Ninth Malaysia Plan. Sarawak has about 1.5 million ha and Sabah about 400,000ha available for rubber cultivation,

In fact, Sabah and Sarawak are seen as vital new rubber growing zones to boost Malaysia’s dwindling natural rubber output which had dipped to 1.13 million tonnes in 2008 from 1.2 million tonnes in 2007.

Both states were targeted to add another 35,000 tonnes a year to the current total production of 101,000 tonnes.

Having said that, some quarters feel that active replanting and opening up of new hectarage for rubber are not the only answers to address the dwindling natural rubber production issue.

To ensure resilience in the sector, rubber planters including smallholders will need to be exposed to new varieties and clones; infrastructure in the remote planting areas should be improved; and changes made in the agriculture management practices and policies.

The current climate change, for example, has a big impact on the growth of rubber trees. This development warrants reviewing some of the existing rubber zones in the peninsula.

One suggestion could be for all “traditional” rubber zones with lacklustre yields to be remodelled via adaptive management using suitable species and clones.

Throughout the years, the Malaysian Rubber Board (MRB) via the Rubber Research Institute has been diligently producing high quality timber latex clones such as the RRIM 900 series, RRIM 2000 series and the latest RRIM 3000 series, that have resulted in high-yielding latex and bigger girth trunks for timber production.

Another important factor is to seriously consider advanced research in soil conservation, water storage and management. This will help promote low tillage and maintenance of permanent soil cover that increases the soil organic matter and reduces the impact from drought, flooding, erosion or heavy rain.

In addition, there should be an efficient fertiliser programme, particularly among smallholders, which contribute about 94% of the country’s total rubber production.

Smallholders are often perceived as inefficient given their low crop yield due to the lack of good agriculture practices as well as improper management skills.

On average, rubber smallholders produce about 1,100kg of latex per hectare a year compared with a potential production of about 2,500kg. The current average crude palm oil production among smallholders is about 10 to 15 tonnes per hectare a year versus a potential yield of 20 to 30 tonnes.

(biz.thestar.com.my)

Rubber seen easing on global cues, weak demand

MUMBAI: Indian rubber prices, which hit record highs last week, are likely to correct this week tracking weakness in global markets and as reluctant buyers wait for a sharp fall before purchasing, analysts said. 

"Buyers are postponing purchase. Prices in international market are falling and tyre-makers are waiting for a fall in domestic prices," said Shiji Abraham, analyst with JRG Wealth Management. 

Tokyo rubber futures tumbled to a near-three-week low on Monday, falling sharply from last week's 21-month high as the Goldman Sachs fraud probe unnerved financial markets and lower oil prices added to the pressure on rubber, dealers said. 

The benchmark May contract on the National Multi-Commodity Exchange(NMCE) provisionally closed 1.4 per cent down at Rs 16,629 per 100 kg, after hitting a record high of Rs 17,189 last week. 

Spot price of the most traded RSS-4 rubber (ribbed smoked sheet) fell by Rs 250 to Rs 16,700 in Kottayam, Kerala, on Monday, Rubber Board data showed.

The price had hit a record high of Rs 16,950 on Saturday. 

Production worries in key producing countries like Thailand and Malaysia will limit the fall in prices, Shiji said. 

In India, sales of vehicles -- including cars, utility vehicles, trucks, buses, motorcycles and scooters -- jumped an annual 26.4 per cent in 2009/10 to 12.3 million units, data from Society of Indian Automobile Manufacturers (SIAM) showed. 

India's natural rubber production dropped 3.8 per cent in 2009/10 due to adverse climatic conditions, but a rise in consumption during the period lifted the country's imports, the Rubber Board said.

(economictimes.indiatimes.com)

Rubber Board output estimate dubbed ‘over-optimistic'

Kochi, April 19

Projections made by the Rubber Board on the country's rubber production for the year 2010-11 are grossly over-estimated, the Indian tyre industry has said.

The Automotive Tyre Manufacturers Association (ATMA) has termed the Rubber Board's projection of 70,280 tonnes of additional production this year over-optimistic. This is far in excess of the average annual increase of 21,000 tonnes recorded by Indian rubber producers over the last 10 years, ATMA pointed out.

“We see no basis for the over-optimistic growth projections made by the Rubber Board. The over-estimated projection will only send a wrong signal to the Government about natural rubber availability while the gulf between production and consumption of rubber is widening in India and production has not been able to keep pace with rising consumption.

The production deficit of rubber in India increased to 99,165 tonnes in 2010-11 as against 7,220 tonnes in 2008-09. To meet the deficit, the rubber industry had to import 1,70,000 tonnes of rubber in 2009-10 as against 81,500 tonnes in 2008-09,” Mr Neeraj Kanwar, Chairman of ATMA, said.

Rubber board's view

ATMA also pointed out that an earlier study conducted by the Association of Natural Rubber Producing Countries had projected production of rubber in India in 2010 at 8,53,000 tonnes, the same production as in 2006.

However the Rubber Board has defended its projections stating that it is just three per cent more than the production of 2008-09. It pointed out that last year was an exceptional year of low global production and growth projections should not be based on such exceptional years.

Its projections were based on the fact that more than 6,000 hectares of additional area would come under tapping as young trees planted seven years ago mature and become ready for tapping. The prognosis were also based on the fact that new and high yielding planting materials were used in the new plantations as also the surmise that the high prices would induce the farmer to intensify his tapping operations.

Consumption issue

ATMA has also expressed its surprise on the growth in consumption as projected by the Rubber Board. The Board has lowered the incremental growth in natural rubber consumption to 56,395 tonnes as against a growth of 59,280 tonnes in 2009-10.

In order to meet the rising demand from vehicle makers in the country, new capacities being put up tyre manufacturers and rubber consumption is poised to grow spirally. The decrease in incremental consumption as estimated by the Rubber Board is most unfortunate and belie the growing requirements from consuming interests, Mr Kanwar added.

In a recent communication to the Prime Minister, Mr Kanwar has asked for permission for duty-free import of at least 2,00,000 tonnes of natural rubber as rubber availability has become a matter of serious concern even when the prices have touched a historic high.

Currently rubber prices are ruling at Rs 172 a kg, almost 80 per cent more than the average price of Rs 95 per kg in 2009. Tyre companies are not in a position to import rubber since they have to pay a 20 per cent customs duty on such imports.

(thehindubusinessline.com)

Tyre companies expect tight margins on rubber shortfall

Alex K Mathew

Head of research, Geojit BNP Paribas Financial Services

We are slightly negative on tyre stocks. Natural rubber prices are running at an all-time high across world markets, including Tokyo and Taiwan. In India, prices of natural rubber are hovering at Rs 175-177 a kg and we believe the prices will firm up further due to the deficit in rubber production.

Kerela, the largest producer of natural rubber, is expected to see less rainfall this year. This may increase rubber prices further. Rubber traders are also hoarding the commodity in anticipation of a price rise, which is making matters worse. Any price above Rs 150-155 a kg is a concern for tyre makers as it puts pressure on profitability. Tyre makers are trying their level best to pass on this rise in raw material costs to consumers.

In fact, they have revised prices twice this year. But, they can’t raise prices so often. The fourth quarter results will be impacted by higher raw material costs. But we don’t expect tyre companies to come up with very poor results. A rise in demand from the replacement market will help them report decent results. However, we expect the sector to lose support as car sales may slow down gradually. Investors may look at stocks like Apollo and MRF if rubber prices fall below Rs 155-160 a kg.

(mydigitalfc.com)

Rubber prices soar by 236 percent

THE PRICE of dry rubber has increased by more than 236 percent year-on-year in the Kingdom, according to a report by Cambodia’s General Directorate of Rubber.

According to an organisation paper, obtained Sunday, the price of rubber sold to international markets this month reached US$3,700 per tonne. In April last year, rubber was sold for only $1,100 per tonne, with a 2009 market high of $3,000 per tonne.

Ly Phalla, director general of the General Directorate of Rubber, said Sunday that such sharp increase in rubber prices has not been seen for 60 years. It has resulted from demand outstripping supply, he said.

Last year, because of the unfavourable weather and unusual heavy rainfall in major producing areas such as Thailand, Indonesia and Malaysia, world production decreased around 6 percent. 

“We hope that the price of dry rubber will keep on increasing,” added Ly Phalla.

Mork Kim Hong, president of Cambodian Rubber Association, said: “I believe that the increase in rubber price will help encourage Cambodia, which still has a small number of rubber plantations, to grow more and more rubber trees." 

So far, much of Cambodia’s 130,000 hectares of rubber cultivation consists of young crops, which have not yet yielded. In 2009, the Ministry of Agriculture, Forestry and Fisheries reported that Cambodia produced 37,000 tonnes of rubber, 36,000 tonnes of which was exported.

(phnompenhpost.com)