Aravindan
C.J. Punnathara
Kottayam/Kochi, June 28
Sheet rubber prices for RSS 4 grade flared up to Rs 180 a kg on Monday on lower arrivals, partly on account of the rain arresting tapping operations and farmers withholding stocks. Despite the high prices and low arrivals, there was fair amount of buying from the market, mainly by the big tyre companies.
Mr Sajen Peter, Rubber Board Chairman, expressed his satisfaction over the rise in rubber prices. But he pointed out that the difference between the domestic and international price is Rs 10.
‘Harmful’
Further rise in rubber prices is not in anyway beneficial to the rubber industry and it appears to be unhealthy to the rubber sector as a whole, said Mr George Waly, President, Indian Rubber Dealers Federation at Kottayam.
“Rubber prices have been on a steep upward trajectory over the past few weeks and have touched a record high level of Rs 180 a kg. Industry is compelled to buy its most critical raw material at such unprecedented prices and absorb most of the hike, since the entire price hike cannot be passed on to the end consumers,” Mr Rajiv Budhraja, Director-General of the Automotive Tyre Manufacturers Association, said.
FRESH STOCKS
Of equal concern to the industry is the fact that most of the stocks in the market are fresh stock. Industry doesn’t find any evidence of the two lakh tonnes-plus buffer stock as stated by the Rubber Board. This further lends credence to the industry’s contention that the buffer stock is only on paper. At these prices points, rubber prices have even overshot international prices by Rs 6-8 a kg in case of sheet rubber and Rs 20-25 a kg in case of block rubber. However, due to continuing inverted duty structure, imports are not a viable option either, Mr Budhraja added.
Meanwhile, there were hardly any buyers for lower grade lots in the market and arrivals were virtually nil. The lower grades were most often bought by smaller companies mainly manufacturing cycle and rickshaw tubes that have totally gone off the market, Mr N. Radhakrishnan, former President of the Cochin Rubber Merchants Association, said. Cycle and rickshaw tyre and tubes are highly price-elastic and consumers will not be willing to buy at the current high prices.
Also, there was relative convergence between rubber futures and spot prices. While the divergence between rubber futures and spot prices had flared up last month in anticipation of lower tapping and subdued arrivals in the market, that trend seems to be reversing at the moment, a trader in the futures market said.
Arrivals may rise
Besides, arrivals are expected to perk up in the coming months as the monsoon begins to wane and the productivity of the trees increases. There is also apprehension that with international prices lagging behind domestic prices, how far could the price surge be sustained in the market. But the growers are happy reaping windfall gains which they would not have believed possible six months ago.
Reports also indicate that there have been not been significant slowdown in tapping operations due to the monsoon. The intermittent nature of the rains and high prices have encouraged the farmer to continue with his tapping operations. Also, over 75 per cent of the rubber trees are rain guarded in order to pursue unhindered tapping operations even during the rainy season.
Spot rubber continued to explore record highs on Monday. The market opened with a gap after being closed for a hartal on Saturday and improved sharply on covering purchases to fill the gap between the domestic rubber futures on NMCE. Sheet rubber flared up to Rs 180 from Rs 177 a kg, gaining further strength from short supplies. Meanwhile, intensified rain was reported from the plantation areas and the market made all-round gains even amidst below-average volumes.
On the National Multi Commodity Exchange, the July series weakened to Rs180.51 (181.94), August to Rs 173.75 (174.53), September to Rs166.98 (167.93) and October to Rs 162.90 (164.54) a kg for RSS 4. On Tokyo Commodity Exchange, the July futures increased to ¥367.1 / Rs 189.66 (¥363.7), September to ¥321.3 (¥319.9), October to ¥300.2 (¥297.7) , November to ¥289.5 (284.7) and December to ¥283.8 (278.6) while the August futures closed flat at ¥340.2 (¥ 340.2) a kg for RSS 3 during the day session. The July futures slipped to ¥365 (Rs 188.54), August to ¥335.9, September to ¥319.5, October to ¥299 and November to ¥289 while the December futures closed steady at ¥283.8 a kg during the night session. RSS 3 (spot) firmed up to Rs 170.95 (169.98) a kg at Bangkok. Spot rubber prices (Rs/kg) follow: RSS-4: 180 (177); RSS-5: 178 (174); Ungraded: 176 (172); ISNR 20: 158 (156) and Latex 60 per cent: 127 (122).
(thehindubusinessline.com)
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