Rubber market bearish on huge stocks, low exports

Natural rubber prices are bearish despite a decline in off-seasonal production, owing to huge stocks. The huge stock position nullified the effects of a drop in production and kept the prices low, said local rubber traders.

The price of benchmark RSS-4 is hovering around Rs 94 a kg, reflecting a steady movement in the last one week. Market sources do not expect any spurt in the prices unless a chunk of the stock is siphoned off by exports. The higher Indian tags compared with the prices abroad make the country's rubber unattractive in the global markets.

The total stock rose to 162,000 tonne as on March 31, 2007, according to provisional estimates of the Rubber Board. This is the third highest stock position in the last 40 years. The highest-ever recorded stock was 193,000 tonne in 2001-02 and the price of RSS-4 then had dropped to Rs 26 a kg. The stock level in 2000-01 was 183,900 tonne.

A decline in exports to 54,361 tonne in 2006-07 on the back of a 6.3 per cent increase in total production has led to the stock piling up. A slowdown in domestic consumption, growing at a rate of 2.4 per cent, has also led to a rise in stockpiles.

Moreover, a record high imports in 2006-07 at around 84,000 tonne has added to the glut in the rubber market. With a difference of Rs 4-6 a kg between domestic and global prices, rubber-based industries, especially tyremakers, still find imports a viable option.

Traders here estimate that the production in April this year may fall below 50,000 tonne due to extreme summer in major parts of Kerala. In April 2006, the production was 50,000 tonne, which had risen to 53,000 tonne last May. Water shortage has hit processing of latex. Many growers have stopped tapping rubber due to the scorching summer heat and scarcity of water. Growers expect reasonable showers in April and hope that it may boost production in May.

An indefinite lorry strike in Kerala since April 1 has hit the movement of rubber to other states. The stir, coupled with issues related to VAT, has paralysed rubber trade for the last one week.