Rubber to rule high on low production

The drop in production during the first six month of the current financial year coupled with the increase in consumption will keep rubber prices at higher levels for rest of the year.

Leading Kochi-based stockists and dealers foresee a price band of Rs 85-90 a kg for RSS-4 grade (quoting at Rs 89 today) for the rest of the year.

With imports of natural rubber expected to grow at a slower rate during October- December, the prices will further go up. As the gap between domestic and global prices is narrow (Rs 1-2 a kg), the scope for large-scale imports is also ruled out.

Experts feel unless the global prices are lower by Rs 4-5, imports may not be a viable option for the rubber industry. Major organisations of rubber-based industries "" Automotive Tyre Manufacturers Association (ATMA) and All India Rubber Industries Association (AIRIA) "" have been demanding for long withdrawal of the duty on rubber imports as the domestic prices are high and there may be shortage of rubber unless more rubber comes through import.

During April-September, rubber output fell by 16 per cent to 320,000 tonnes from 382,210 tonnes last year, according to latest Rubber Board estimates. The Board has earlier estimated an output of 384,000 tonnes. The fall in production is attributed to incessant rainfall and spread of deadly diseases in producing areas.

The gap between domestic production and consumption widened further as consumption surpassed production by 96,800 tonnes in April-September. This was 21,770 tonnes during the same period in 2006-07.

The gap was somewhat filled by imports and carryover stock of 94,000 tonnes. During April-September, total imports went up to 39,495 tonnes against 27,530 tonnes last year.

According to the board's recent estimates, total production in 2007-08 will fall short of last year's figure of 853,000 tonnes by around 75,000-80,000 tonnes.

The 16 per cent drop in April-September is unlikely to be fully compensated during October-December, and hence the actual production may miss the projected figure of 874,000 tonnes by 100,000 tonnes.