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High global prices to push natural rubber exports

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George Joseph Kochi

The natural rubber (NR) market is set to take a U-turn, with India, a net importer till now, likely to increase its exports, since global prices are ruling higher than domestic prices for some weeks.

The market here quoted Rs 190a kg for RSS-4 grade on Wednesday, while in Bangkok spot trade it was quoted at Rs 202 a kg. A couple of weeks before, the domestic price was higher by Rs 14-16 a kg than the international tags. This change may trigger a rise in export from India.

Analysts also say if lower domestic prices prevail for a longer period, India may be an attractive centre for importing nations.

 

The Thai government’s decision to intervene in the market to bail out growers had triggered a spurt in international prices.

In January, the Thai government decided to procure 200,000 tonnes of rubber to arrest a fall in prices. The government plans to spend $535 million for market intervention to boost prices.

On January 24, the Cabinet granted 15 billion bahts at zero interest to rubber cooperatives and the Rubber Estate Organisation for market intervention operations.

The money is for purchasing RSS-3 grade sheet rubber with an aim of pushing prices up to 120 baht a kg, after keeping 200,000 tonnes of stock. Thai NR prices have since advanced to their highest level in 12 weeks.

According to experts here, this is the major factor behind the sharp increase in global prices. According to N Radhakrishnan, former president, the Cochin Rubber Merchants Association, Chinese buying was earlier expected to decrease thanks to the lower economic growth there. This caused a fall in prices, as excess production was estimated for this year. According to the latest forecasts, Chinese consumption is likely to go up and there might not be a glut in the NR market. This also supported the recent rise in prices.

The Association of Natural Rubber Producing Countries projects only a marginal growth of 0.3 per cent in production for January-March of 2012. So, most of the physical factors governing the global mart favour a rally in prices in the quarter.

A whopping 320 per cent increase was recorded in rubber exports during April-December period of the current financial year. A total of 22,472 tonnes were shipped in the period, as against 7,293 tonnes in the same period last year.

There has been a slowdown in import, as only 133,693 tonnes were brought in compared to 166,463 tonnes last year.

In April-December, 717,485 tonnes were consumed domestically, as against 708,705 tonnes in the same period last year. Total production in the nine-month period was 679,100 tonnes, as against 651,150 tonnes earlier.

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First Published: Feb 02 2012 | 12:07 AM IST

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