Market may see drop in rubber supplies

Stocks 56% below board estimates; Prices at Rs 89.50

Natural rubber inventories in the domestic market has dropped drastically as actual stocks dropped to 41,000 tonne as on March 31 2006. This is 55.91 per cent below the Rubber Board's recent estimates of 93,000 tonne.

Traders in Kochi said the current stock in the market will last only three weeks, which in turn will pull up prices by huge margins in the next two months.

Price of RSS-4 grade has increased to Rs 89.50 a kg and that of RSS-5 increased to Rs 88.50. ISNR-20 grade registered Rs 88 a kg today showing an increase of 50 paise on an average.

Rubber-based industries have a total inventory of 40,000 tonne, of which the tyre industry has 30,000 tonne. Around 7,000 tonne is stored in various warehouses. Stockists, small and medium dealers and growers together have another 40,000-41,000 tonne. It is this stock that is keeping prices in check in the market.

As production will be curtailed during the next four-six weeks inventories will drop further which in turn will affect the availability of natural rubber in the domestic market.

This shortfall could pull up prices of the benchmark RSS-4 grade to Rs 100 a kg within a short period.

According to the board's estimates, total opening stock as on April 1 of 2005 was 1,06,200. Total production during 2005-06 was 8,00,300 tonne. But with the import of 44,672 tonne, total availability had increased to 9,53,872 tonne.

Aggregate consumption, including export of 69,446 tonne, had enhanced to 8,70,446 tonne, while total stocks were estimated at 93,000 tonne.

But prominent dealers disputed this by arguing that the available stock only around 41,000 tonne and market would be running short unless production is stepped up. But the present climatic conditions does not favour production, which will keep stocks low and prices high.

As on April 1, 2001, total stock was 1,93,000 tonne, which decreased to 1,17,000 tonne within a year. Stock dropped further to 77,293 tonne in 2003-04 primarily because of record exports in that year. But with consumption steadily increasing, stocks showed a downward trend during next two years.