Natural rubber hits record high at Rs 66/kg

The natural rubber market created a landmark by achieving the highest price ever recorded in the month of October in the history of rubber trading in India.

The price of benchmark grade, RSS-4, has galloped here today to Rs 65.50-66 a kilogram, which is a record for the month of October. There is spurt in prices of other grades too, and price of ISNR-20 (crumb rubber) is at Rs 64-65.

As rubber production is at its peak during October-December, prices are normally at rather lower levels than those during other months of a year. But year 2005 has offered a different story altogether in the month of October.

During the first week of October 2004, the price of RSS-4 grade was Rs 52 and that of ISNR-20 was Rs 50 only. It is the increase in export demand that has pulled up the price line to new higher levels.

Export demand stemmed from the continuous spurt in prices in global markets. Traders here said export demand is high for both RSS-4 and ISNR-20, but there is shortage of good-quality rubber in the market.

N Radhakrishnan, president, Cochin Rubber Merchants Association, said though production is normal now, increase in demand "" both domestic and overseas "" has made the market bullish.

While the average production in October is to the tune of 75,000-80,000 tonne, the average consumption is 70,000 tonne. But as global prices are at higher levels, there is export demand to the tune of 10,000-15,000 tonne during October. It is projected that there would be a shortage of 5,000-10,000 tonne in October alone, which is the basic reason for the spurt in prices now.

Traders said a large number of them could not give delivery during the first week of October against orders in September due to short supply. It is estimated that during April-September 20, total exports were 13,470 tonne, while 35,823 tonne was imported. But traders said in October exports would increase to 10,000-15,000 tonne.

The year 2005-06 has witnessed commendable hikes in natural rubber prices, with the highest price of Rs 70 being recorded on July 25.

Yearly average prices for the past few years were rather low at Rs 55.71 in 2004-05, Rs 50.50 in 2003-04, Rs 39.19 in 2002-03, Rs 32.28 in 2001-02 and Rs 30.31 in 2000-01.

The price of RSS-4 grade was Rs 58 on September 1, and as the main production season is slowly picking up, prices are surging ahead in line with global changes.

Market experts said the present oil scenario is a major concern for the rubber-based industry "" especially automotive tyre manufacturers "" as the cost of production of synthetic rubber is on the increase, which again is resulting in the increase in natural rubber consumption. But the production is not picking up with the worldwide demand. Market sources expect shortage in natural rubber supply within a few years.

As the economic growth of China and India is well ahead of other world economies, the total consumption in these countries is increasing by the day. This is mainly due to the growth of the automobile industry in these countries. China has become one of the largest importers of natural rubber in the world.

In India, according to projections of the Rubber Board, there will be a shortage of 12,000 tonne during the current fiscal, as the total production is estimated at 7.80 lakh tonne, while consumption is pegged at 7.92 lakh tonne.

Experts said a similar increase in consumption is likely to occur in most of the Asian economies, and the galloping crude prices will badly hit the rubber-based industry.