Rubber prices likely to drop on poor demand

Low domestic prices send a positive sign for exports.

Spot and futures rubber prices were likely to fall in the week ahead due to weak demand, dealers said. Good inventory levels with the domestic user industry and choppy trend in Asian markets were the main reasons for weak demand, they said.

However, a section of dealers said exports gathering momentum could help prices to stay steady.

The gap between domestic and global prices widening to over Rs 15 a kg was a positive sign for revival of exports, they said.

Benchmark RSS-3 in Bangkok today is at Rs 106.38 a kg compared with Rs 90.50 for its domestic equivalent RSS-4.

However, some dealers said pick-up in exports was unlikely immediately as overseas buyers would adopt a wait-and-watch attitude before turning to India as Asian markets themselves were volatile.

Rubber contracts in Tokyo recovered slightly on Tuesday after Monday's sharp fall. Today they are again down, they said.

Chinese premier Wen Jiabo pegging gross domestic product at 8 per cent for 2007 is also likely to keep sentiment weak in Asian rubber markets. China is the largest consumer of natural rubber in the world.

Exports from India failing to pick up despite global price staying higher by Rs 5 a kg on average compared with domestic price since January is a sign of bleak prospects, a dealer said.

In 11 months of FY07 (Apr-Feb), rubber exports slipped 20 per cent to 52,430 tonne compared with the same period a year ago, he said.

On National Multi Commodity Exchange of India, active April contract shed nearly 13 per cent to Rs 8,750 per 100 kg, while rubber spot slipped nearly 5 per cent to Rs 90.50 a kg compared with a week ago.