A confusion ridden natural rubber (NR) market on Tuesday plummeted heavily and bench mark grade RSS-4 quoted Rs 110 a Kg, lower by Rs 11 per Kg than the closing rate of Monday.
In just two days the price crashed by Rs 15 a Kg on account of global economic crisis which made NR markets world over panic. The price shed by Rs 26 during last seven days as on 22nd of this month the spot trade was opened at Rs 136 a Kg.
The current situation has created a panic selling spree in Kottayam and Kochi markets as rumours spread in the market that there would be heavy crash in the coming days and price tags might be pulled down below Rs 100 level.
According to George Valy, president, Indian Rubber Dealers Federation (IRDF) the market was ruled by confusion and there was strong selling pressure. Major rubber based industries especially, tyre companies are keeping aloof of the market, keeping a vigil on the prices to intervene at a ‘right time’. The industry had even bought rubber at a price tag Rs 140 during the opening week of September.
Leading Kottyam based growers said that farmers are panic as the main production season had already commenced. After Onam holidays tapping of plantations had picked up and during last couple of weeks almost 30,000 tonne were produced. Farmers were very active with tapping anticipating further appreciation in prices, but the sea change in global economic scene has tarnished their expectations.
Depreciation in the price of crude oil is a main concern of natural rubber mart as this in turn will cause a drop in the prices of synthetic rubber (SR). It is actually the huge rise in SR prices during last 12-16 months was the crucial reason for the sharp rise in the prices of NR.
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There is an increase in the consumption of NR owing to the huge price of SR which is almost double the price of NR. But the drop in price of crude oil may lead to depreciating SR prices world over. World market became panic over this theory.
Price of RSS-3 grade in major world markets has dropped to Rs 115 a Kg and the Indian market followed suite. The market has a strong apprehension that the global economic crisis will lead to a slow down in the consumption of NR. Since natural rubber is used mainly in automotive sector and household items, any crisis in major economies like the US and Europe may badly affect rubber consumption which troubles the market world over.
Market sources told Business Standard as the number of buyers at the current price level is very low market might be in deep crisis in the days to come. Supply will be at its best during October – January period thanks to favourable climatic condition and the current global market trend may add more oil to the fire in domestic NR mart.