Rubber crosses Rs 100 mark twice in 9 months

In the domestic market, natural rubber prices crossed the Rs 100 a kg barrier for the second time in nine months, at the close of trading last week. The benchmark RSS-4 today touched Rs 101, even as the tyre industry is reluctant to pay above the Rs 100 a kg level for the product.

Contrary to the expectations of most participants of the local natural rubber mart, who had earlier projected such high price levels only by March, the magic mark was reached by the fag end of the main production season. With the market currently in an upbeat mood, growers hope to make most of the opportunity. They expect the prices to scale the Rs 115-120 level soon.

However, given the high stock position, as projected by different quarters, a large section of market players believes that the current price levels are inverse to the fundamentals of the market. They, therefore, anticipate a correction, which they said would hit the high hopes of growers during the off-season of March-April.

The tyre sector is keeping its fingers crossed as it expects rubber stocks to touch the 1,50,000 tonne level by the end of this month. Tyre industry sources said the stocks would grow to 2,00,000 tonne by February, as imports would be on the rise during January-February. According to provisional estimates of the Rubber Board, the total stocks stood at 1,34,000 tonne on December 31, 2006.

Incidentally, the domestic market saw the highest price level of Rs 115 on May 27 last year. In the April-December period, output rose 7.9 per cent to 6,60,180 tonne compared with the same period in the previous year.

According to the board's provisional estimates, total production in 2006-07 will touch 8,43,000 tonne, 5 per cent higher than a year ago. At the beginning of this financial year, the Rubber Board had estimated an increase of 3.5 per cent only.

The higher prices during the major part of 2006-07 had resulted in the sharp rise in rubber output.

For December 2006-January 2007, production is expected to touch 1,93,000 tonne, while during the off-season output may reduce to just half that. This is expected to drive the bull run in the domestic natural rubber mart. Again, production is estimated to be 43,500 tonne in February, while March may see 45,500 tonne. The output is likely to pick up only by the next monsoon season.

The current rally would affect the market badly, experts felt. This is because as the rally during the main production season was orchestrated by speculators in futures trading, the stock had piled up with growers, they said. Any major shift in price levels would lead to a glut in the domestic NR market, the experts added.

A few weeks ago, the Rubber Board had even warned of such a market situation. But the rubber growing areas of Kerala and Tamil Nadu are in a jubilant mood now, as these expect to realise good prices over the next two-three months.