Natural rubber (NR) mart moved to a slightly higher tier and is quoting at Rs 72 per kg for benchmark grade RSS-4 today. On March 2, the market quoted at Rs 70 and the upward movement is on account of a rather weak supply to terminal markets. Production is on a weak mode now as extreme summer has hit tapping of rubber trees in most plantations.
According to growers it is very difficult to tap the trees as daytime temperatures are around 40 degree celsius. This is rather unusual in Kerala and the absence of summer rainfall made the situation worse. As the market is on a slightly upper mode and production is weak, there is resistance among growers to tighten the supply further.
The entire state of Kerala is waiting for summer showers since this is essential for most of spices, coconut and natural rubber. Growers said once plantations get rain, there would be an improvement in production. It is estimated that production during February and March would be in the range of 50,000-55,000 tonnes, which is half the production of the October - December period.
According to dealers, although there is a temporary crunch in supply, demand was weak due to low offtake by tyre majors. So, it is likely the spot market will move in a range of Rs 70-73 per kg for the time being. The intensity of rainfall is a crucial factor in deciding the course of action in NR mart.
World over, the market seems to be in sluggish mode as the drop in consumption in 2008-09 is more obvious than the drop in production. According to the latest estimates, global consumption of NR would be lower by 6 per cent in 2008-09 than last fiscal year. Production is estimated to be lower by 1-1.5 per cent only. In 2007-08, the total global production was 9,725,000 tonne while consumption was 9,719,000 tonnes. Both, production and consumption went hand in hand last fiscal.
But there will be a shortfall in consumption by 550,000 tonne this fiscal that leads to an additional stock of 450,000-500,000 tonnes.
As global economic recession is worsening even the most optimistic experts can not see a sharp increase in consumption in 2009-10. World over, production in the automotive sector is in the doldrums and this indicates a rather weak consumption and hence a weak rubber mart next fiscal. But, experts do not foresee a free fall in prices as in the case of crude oil.