Rubber on boil as buoyancy rubs off '07

Prices touch Rs 96 a kg, may hit Rs 100 mark soon.

In the domestic market, prices of natural rubber surged further. They touched Rs 96 a kg today on intense speculative trading in the futures market, coupled with a poor supply situation in major terminal markets such as Kottayam and Kochi.

With Tocom futures also ruling high, domestic growers and stockists are bullish on the outlook for 2007.

The current slowdown in global production too favours a good rally in rubber. Torrential rains have severely affected tapping and processing in Thailand and Indonesia and eventually, production in these countries. Also, there was a spurt in rubber prices in the Bangkok market, mainly on fears that production there might be hit in the current year.

According to experts, although the market parameters indicate a further rally, a quick correction is inevitable.

However, they said, it would be rather difficult to predict the timing as the domestic market was being controlled by speculative trading.

The current rally should be attributed to widespread speculation in futures trading "� more than global market conditions, they said.

There was a well orchestrated campaign in the market favouring a huge hike in the price of benchmark grade RSS-4, which was expected to touch the Rs 150 a kg mark in shortly, sources said.

A city trader said as the price of RSS-4 grade had already crossed the Rs 90 mark and was poised to touch Rs 100 soon, traders were bullish on the New Year.

The domestic market had crossed the Rs 90 level on December 16, and since then rubber prices have been spiralling, reportedly, on the bullish trend prevailing in the global market.

And according to market experts, the bull phase may continue for some time more as climatic conditions in major rubber-producing nations across the world do not favour growth in production for the time being.

In anticipation of a hot market situation, growers are reluctant to release their stocks at the prevailing prices now. This has also negatively impacted the supply position in the local market.

Most growers expect prices to touch the Rs 150 level by February when seasonal production will come to an end. A Kottayam-based dealer said against an average daily supply of 3,000 kg during the season he had currently been getting a maximum of 400 kg for the last few weeks.

According to Rubber Board estimates, with the current average daily production of 3,500 tonne, December and January will have output of 99,500 tonne and 93,500 tonne respectively. And with supplies not keeping pace with production, stocks have been on a rise.

With fears of huge stocks going forward "� by February-March, the Board had issued a warning saying stocking of more rubber would be suicidal for the sector as there was possibility for a glut in the domestic market even during off-season.

Narrowing the gap between local and global prices may benefit growers since there will be a slowdown on the import front, feel experts.

Earlier, when the gap had widened to Rs 8-10 a kg, rubber-based industries "� especially the tyre industry "� had placed orders to import natural rubber.

Market experts expect a consolidation of prices in the New Year as worldwide demand for natural rubber is on the rise.

They say as seasonal production ends by next month and demand rises, the bulls will emerge stronger in the natural rubber mart, but a correction is also on the anvil as the market is under the clutches of speculative trading.