Global economic turmoil has adversely impacted the natural rubber market across the globe as the price has tumbled in just 10-15 days. The sharp fall in offtake by industrial users, especially tyre companies, caused one of the sharpest drop in prices in recent times. The local price of benchmark grade RSS-4 dropped to Rs 175 a kg on Thursday, before stabilising around Rs 185.
On November 5, the Kottayam market closed at Rs 208, but this week saw a seachange in market conditions. A month ago, the market quoted Rs 214 a kg and in this June the average price was Rs 226. According to tyre industry sources, the demand from the original equipment segment had dropped around 30 per cent during the last 7-8 months.
In India, around 55 per cent of the total NR output is being consumed by the tyre producing segment.
According to N Radhakrishnan, former president of Cochin Rubber Merchants Association, the demand from the tyre industry had dropped heavily in the last 2-3 months. Latest estimates of the Rubber Board show that in the April-October period of the current FY, NR production increased 5 per cent to 480,700 tones while consumption edged up just 0.2 per cent.
The global price of the commodity had a much sharper fall as the Bangkok market today quoted Rs 161. On 1st of this month, this was Rs 195. According to experts, demand from the EU region had declined to a great extent as countries like Italy and Germany are facing serious crisis. There is a heavy drop in the production in Thailand, the largest NR producer in the world, due to the recent rainfall and floods. In case of normal supply from that country, the price could have dropped below Rs 150 a kg, said experts.
The price may even drop to Rs 125 -130 in the next financial year.
World over the main production season in rubber plantations is active and production will be at its maximum during October - January period. In India, around 40 per cent of the total annual production is being carried out during this period. So supply will be at its peak, which also accelerates the bearish trend in the market. Tapping in most of the plantations in Kerala is in full swing now and production will be at its maximum.
According to the Association of the Natural Rubber Producing Countries, the global supply of NR in 2011 scaled up to 6 per cent while demand slowed down to 2.6 per cent.
