Natural rubber (NR) prices tumbled heavily on Monday, mainly on account of the sharp fall in prices in the overseas markets. The market of RSS-4, the Indian bench mark grade, on Monday quoted Rs 210 a kg, lower by Rs 6 from last week’s closing rate.
The demand for the RSS-4 grade has been paralysed for the last few weeks as the offtake from the tyre industry was rather low. This happened due to the decrease in demand for tyres from the automobile sector. The set back in the sales of auto sector during last 5-6 months had heavily impacted the demand from the original equipment (OE) sector.
According to a leading rubber trader, based in Kottayam the order book of the tyre companies was lower for the last 8-10 weeks and he expect a further fall in prices in the coming weeks. A leading Kochi based dealer said that tyre industry is now opting to import SMR-20 (ISNR-20) grade which is cheaper than the RSS-4 grade and having no serious issue on the quality front.
In Kuala Lumpur market the grade on Monday quoted Rs 193 a kg and it is still cheaper in countries like Thailand. The domestic offtake by the tyre sector had been reduced due to this, he added. A serious set back to the rubber based SME sector and the closing down of around 600 units during last one year also caused concern on the demand of the crop. According to an initial estimates of the trading sector the demand for RSS-4 grade has been dropped 10-20 per cent in last couple of months. This has been vividly figured in the provisional estimates of the Rubber Board also.
The consumption of NR in May dropped 1.8 per cent to 81,000 tonnes as against 82,500 tonnes in April, 2011. This is for the first time during the last couple of years consumption registered a fall. Production increased to 59,700 tonnes in May as against 56,400 tonnes in last May, registering a growth of 5.9 per cent. The combined production in April and May increased to 116,500 tonnes as against 109,900 tonnes in the same period of last year, recording a growth of 6 per cent.
Wheras consumption in the same period of 2011-12 has increased 3.9 per cent only, indicating the recent contraction in demand. During last year consumption has increased at a much faster pace than production in all the 12 months. Global supply of NR is also expected to rise as production has increased in January-June period of this year. According to projections the production in this period shall be 4.5 million tonnes as against 4.2 million tonnes in the same period of last year.