Rubber prices stabilise as tyre firms defer purchases

C.J. Punnathara

Kochi, June 10

The price of natural rubber has stabilised in the domestic market on steady arrivals and subdued demand.

Several of the small scale rubber-based industries have shut shop temporarily or permanently as they find iteconomically unviable to operate at the existing high raw material prices and weakening overall demand, Mr N. Radhakrishnan, former President of the Cochin Rubber Merchants Association, said.

Of the monthly domestic demand of approximately 75,000 tonnes, almost 30-35 per cent comes from small-scale rubber industries. As monthly demand has weakened, prices have more or less stabilised at their current highs.

The bigger tyre companies are also deferring bulk purchases, reducing the overall demand.

Production expectation

The prediction that domestic rubber production is slated to increase this year is also expected to douse the price spiral.

Between January and April, natural rubber production is expected to have grown 8.5 per cent. The prognosis by the Association of Natural Rubber Producing Countries (ANRPC) is that production is slated to grow by 12 per cent in May-July period.

The association, which accounts for 94 per cent of global natural rubber production, has said that for 2010 Indian rubber production is slated to grow by 9.1 per cent.

Moreover, there has been no slackening of arrivals as the farmers continue to tap the trees in spite of the onset of the rains. “The farmers are mercilessly tapping the trees to reap high prices,” Mr Radhakrishnan said.

Moreover, there is abundant stock which is beginning to reach the markets. Stocks will start coming back to the market as and when prices ease and there is a threat they might fall further, rather than when they strengthen, sources in the trade said.

Despite the merciless tapping, the onset of the regular summer rains is also expected to dampen output and arrivals into the market. As the monsoon intensifies and becomes persistent it is expected to affect tapping and curing operations.

Also, the onset of ‘fever season' in the rubber growing belts of the country is likely to increase absenteeism and reduce production.

Skilled labour which all along had been an inherent problem in plantations is likely to intensify with the onset of the fever, sources pointed out.

Bullish on production

As more and more areas under fresh rubber plantations are expected to become productive in the coming years, the Rubber Board remains bullish on production prospects into the coming years.

However, trade sources point to the huge backlog of old trees which need to be replanted in order to sustain growth in production. Replanting has not been undertaken on a systematic or in an organised manner.

As the real estate value of land has been growing rapidly, it is doubtful if large tracts of land, which await replanting, will ever come under rubber trees again, they warned.

(thehindubusinessline.com)