Rubber prices rise as crunch fears loom

The continuing surge in global markets has resulted in an increase in domestic natural rubber prices. Benchmark grade RSS-4 surged to Rs 68 a kg, Rs 1.50 higher than the closing price of last week.

Similarly price of ISNR-20 (crumb rubber) has increased to Rs 66 and that of un-graded sheet to Rs 64 here today. Traders said that even at these price levels terminal markets are short of rubber since growers are anticipating further escalation of prices.

A trader said at the level of Rs 68 there were not many sellers an on the other hand buyers were really aggressive, a trader said.

The sudden spurt in prices in the overseas markets, especially in the TOCOM futures market, is one of the reasons for the present price rise. At TOCOM, RSS-3 grade for May delivery has rose to Rs 80 a kg. Many other markets are also bullish.

Rubber prices soared after reports said global production will not match consumption at least for the next five years. According to the latest projections, rubber production will grow by 2.4 per cent on an average annually and consumption is expected to grow by 3.7 per cent till the end of 2009.

Sources at the Rubber Board said that the production-consumption mismatch is likely to be around 228,000 tonnein 2009. It is these projections that determine the price line for the time being.

Major producers such as Thailand and Malaysia have taken steps to increase short-term production. However, the output in these countries is at the maximum level now. India too can not increase short term production considerably.

Only Indonesia can increase production further on short term basis since the productivity there is rather poor.

Many major producers have adopted strategies to increase long-term production, but these will pay off only by 2011-12. Hence shortage is imminent.

It is estimated that during the current year total global production would be around 89,20,000 tonne. In the next year, the figure would be 92,77,000 tonne and consumption is pegged at beyond the level of 1,00,00,000 tonne.

According to traders, the increased rainfall in most of the producing areas in the South East Asia has badly hit the normal production. A clear estimate of the shortfall is yet to be determined, they said.

India too is not an exemption to the new thesis on global production. During 2005-06, domestic production is estimated at 7,80,000 tonne. The Rubber Board recently revised the consumption projections to 7,99,000 tonne, which i 7,000 tonne higher than the earlier estimates.

According to the board's estimates, in 2006-07 the consumption would increase by 5.8 per cent even as the increase in production would be around half of that "� 2.9 per cent.

But traders here estimate an increase of 8 per cent in consumption as tyre exports alone had increased by 20 per cent this year.