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Global rubber prices tumbled towards their weakest in more than five years, as Thailand, world’s top producer, plans to clear the stocks it had purchased from farmers to support prices, ratcheted up pressure in an already depressed market.
Benchmark Tokyo rubber futures today sank more than 3% in May contract.
In all the 6 contracts, commencing from May, prices have dropped in a range of 1-3%. Thailand had planned to release about 200,000 tonnes of rubber during the current wintering season, when latex output drops. But no sales were made, and caretaker Agriculture Minister Yukol Limlaemthong told Thai media last week that the stocks would be released soon in order to avoid further losses. This has made a panic situation in the global market where demand is already sluggish.
In the local market, price of bench mark grade RSS-4 dropped to Rs 138/Kg from Rs 141, recorded on last Saturday. Bangkok market dropped to Rs 120/Kg from Rs 127 recorded on 2nd of this month.
N.Radhakrishnan, a leading Kochi based rubber dealer told Business Standard that the price might drop further as local demand is rather low. Major rubber based companies are opting for import as price is lower in the overseas. He said that market is very dull as there is not much volume of business. The strong rain in Kerala has affected tapping badly for the last one week and this hindered supply to terminal markets. As the international market is slowed down the price is likely to remain on a low ebb in India also, he added.
Thai rubber farmers said they will gather in Bangkok to protest against the government’s plan, while in rival producers Malaysia and Indonesia, some tappers have stopped tapping, looking for other jobs as tyre grade prices launguish near 5-year lows. According to experts the release of rubber stock by Thailand would further weaken the market as increase in supply will definitely affect the price line very badly. The market is already under pressure for the last 12-15 months as global demand had tumbled heavily. In India the price of bench mark grade RSS-4 had dropped to Rs 138/Kg from a level of Rs 240, over a year ago.
Tokyo rubber futures have tumbled down more than 25%this year on fears about falling demand in China, the world's biggest rubber consumer. China's economic growth is likely to slow to 7.4%in 2014 from 7.7%last year due to the government's drive to curb credit risk and excessive factory capacity.
On Singapore's SICOM exchange, the TSR20 contract - which covers Thai, Indonesian and Malaysian grades - held near its weakest since mid-2009. In Thailand, the price has slipped more than 20%
Meanwhile, Thai rubber farmers decided to protest against the government's plan to sell rubber as they fear the sales will drag falling prices down further.
"We will submit an open letter to the government this week, asking them to hold the plan to sell the stock indefinitely," Boonsong Nabtong, head of the Federation of Rubber Planters Association of Thailand said.
The 200,000 tonnes rubber stocks are smoked rubber sheets bought from farmers between October 2012 and March 2013 to support prices in the domestic market, when the prices tumbled heavily.
