Rubber imports at record high on low global prices

Natural rubber imports are set to record an all-time high in the current financial year, owing to lower global prices as against the domestic ones. A large carry-over stock, coupled with rising imports, has led to a bearish trend in the domestic rubber market.

According to the Rubber Board's provisional estimates, imports as on March 10 are 72,904 tonne, overtaking the previous record of 72,835 tonne imports in 2004-05.

The rubber-based industry estimates the imports to cross 80,000 tonne by the end of the financial year, even as some experts indicate the possibility of the imports crossing 82,000 tonne. Interestingly, the Rubber Board had projected 45,000 tonne imports in the beginning of FY07, but later revised them to 60,000 tonne. 
 

STRETCHING OUT Import and stock position (in tonne)
Year	Import	Stock
2000-01	8,970	1,83,900
2001-02	49,769	1,93,070
2002-03	26,217	1,17,995
2003-04	44,199	85,190
2004-05	72,835	1,10,385
2005-06	45,288	93,000
Source: Rubber Board

The steep rise in imports has led to an increase in the natural rubber inventory and the Rubber Board has projected the year-end stock at around 160,000 tonne, a 67,000 tonne rise over the stock of FY06.

The high stock position in the current year reflects the trend in 2000-01 and 2001-02, when the inventories were at 183,900 tonne and 193,070 tonne, respectively, leading to the crash in the domestic market. Experts believe the domestic rubber market is heading for another crash.

The price of benchmark grade RSS-4 recorded Rs 88 a kg today, down by Rs 8 recorded on January 1. On January 27, the price had touched the Rs 100 mark for the second time in the 103 years' history of rubber cultivation in the country.

Despite the domestic production decreasing considerably in February and March, the bearish trend is strengthening further and a high degree of volatility in the market has dented rubber prices.

The rubber-based industry, especially the tyre industry, prefer ISNR (block rubber) for imports, as its prices are lower than those of RSS-4 sheet rubber. In February, the average global price of ISNR was Rs 93.13 a kg, while RSS-4 was quoting Rs 97.57. The average Mumbai landing price for imported rubber is lower than the domestic price, inclusive of tax, cess and cost for transportation, making imports rather attractive.

Meanwhile, exports are almost stagnant now, as there is a lack of overseas demand. Total exports as on March 10 was 62,199 tonne and dealers expect a maximum of 500 more tonne exports during the next three weeks.

In 2005-06, total exports were 73,830 tonne, while they had crossed 75,000 tonne in 2003-04.

As the production is expected to be lower between March and and May due to extreme summer heat, growers expect a better price realisation by April. Most of them have stocked rubber during the production season, expecting a better price in the offseason, but the market has belied their expectations. The production is estimated to be 46,000 tonne in March and is expected to further decrease in the next two months.