Rubber exports to surge on falling local prices

As the gap between international and domestic prices of natural rubber is narrowing, the country's exports may surge further in the last quarter of current financial year, feel experts here.

As domestic prices were higher by Rs 8-10 per kg till the second week of January, the exports was badly hit during the third quarter according to latest estimates of Rubber Board.

Domestic prices are still Rs 3 higher than the Bangkok spot prices. Traders opined that the exports would pick up only if prices were lower by Rs 4-5 a kg, and in case, the prices goes down by Rs 10 a kg, export will surge.

They, however, said it would not be possible with March, April futures contracts already above Rs 100 mark. But the narrowing gap between domestic and global prices has already given an impetus in the export front.

Meanwhile, total export during April - December, 2006-07 dropped by 7.5 per cent according to the latest estimates of Rubber Board. During this period India had exported 50,728 tonne while 54,863 tonne was the export in 2005.

Although export had exceeded the Board's annual target of 50,000 tonne total export would touch 60,000 -62,000 tonne according leading traders. But if the global tags would hike further the Indian market might have price advantage as in last couple of fiscals there may be a further escalation in the exports of natural rubber.

Experts told Business Standard that the narrowing of the gap could be considered as good sign.

Meanwhile, import had shown a marginal drop of 0.56 percent during April -December period as total import registered 40,716 tonne. But as on January 17 total import had increased to 47,193 tonne. According to experts import would increase further during the last quarter as more orders would be placed during February and March.

Earlier, Board had estimated total yearly import of 45,000 tonne, but the paradigm shift in the global price pattern had changed the scenario in favour of the importers. Traders here estimate total import of around 65,000 tonne by the end of current fiscal as advance license route is more advantageous especially for the tyre industry.

Global market is cheaper as Bangkok spot has a tag of Rs 94 a kg while domestic price for bench mark grade RSS-4 is Rs 97. A major chunk of the tyre manufacturers had already placed orders for import and it would reach the Indian coast in February and March. As the indication of increase in imports India had imported 10,944 tonne during December alone as Indian tags were higher by Rs 8-10 per kg on an average during the month.

Meanwhile, as on 31st December total stock in domestic market had increased to 134,000 tonne and according to indication on production trend price may surge ahead further. As per the estimates of Rubber Board monthly production would be cut down by around 50 per cent in February and March. The estimated production for February is 43,500 tonne and for March it is 45,500 tonne. While production for the current month is estimated at around 93,500 tonne.

As main production season of natural rubber will end this month supply would be in a tight position by next month, say leading dealers and experts. Hence price of RSS-4 might be above Rs 100 a kg by next month.

The board also estimates 5 per cent growth in total annual production, better than the earlier growth estimate of 3.5 per cent at a total of 843,000 tonne.

The volume of import during next two months will be crucial in determining the price level, however, there is still a strong possibility for a northward movement of prices in the lean season.