Tokyo cues, volatile futures dent spot rubber market

Spot prices of natural rubber declined today, owing to highly volatile domestic futures market and a bearish trend on the Tocom, Tokyo's commodity exchange.

The price of benchmark grade RSS-4, which rose to Rs 91.50 a kg last weekend, opened on a weak note at Rs 90 a kg. RSS-3 on the Tocom registered an average fall of 3.6 yen a kg at 294 yen for June delivery, while it dropped to 293.9 yen and 293.2 yen for the July and the August contracts, respectively.

Local traders were surprised by a reverse trend in the rubber market even as monsoon struck the Kerala coast today. Heavy rains between June and August usually affect production, making it difficult to tap rubber.

The average monthly production during the period (June-August) is around 50,000 tonnes, falling short of the average monthly consumption by at least 20,000 tonnes.

The gap between supply and demand generally raises the prices during monsoon. But, the market is seeing a reverse trend because of the unexpected price movement on the futures market and it has upset the spot prices, according to leading traders here.

The futures prices of rubber crashed across the counters of commodity exchanges, with the MCX witnessing an average drop of Rs 230 a quintal to Rs 8,860 for the June contract and Rs 9,050 for the July contract during the early hours of trading today.

On the NMCE, the June contract went down to Rs 8,937 from a high of Rs 9,098 a quintal, while the July contract declined to Rs 9,051 from a day's high of Rs 9,200 a quintal.