Spot rubber heads north

The natural rubber market is heading north and may reach Rs 100 a Kg soon. It has already touched Rs 101 in futures trading, according to leading dealers.

Both the Kochi and Kottayam markets in Kerala, the country's leading rubber trading centers, quoted Rs 98 for the benchmark grade RSS-4 today.

The traders said the spot tag was appreciating by the hour as the market was experiencing a serious shortage of rubber.

George Valy, president, Indian Rubber Dealers Federation (IRDF), told Business Standard that rubber-based manufacturers were stocking rubber as the market was appreciating fast.

According to Rubber Board estimates, production during the April-September period had dropped by 16 per cent to 320,000 tonnes from 382,210 tonnes recorded during the same period last year. This short fall combined with the continuance of rains in Kerala have seriously affected rubber production.

Ruling out a serious shortage, Sajan Peter, chairman, Rubber Board, told Business Standard that 20-25 per cent of the shortfall could be made up during the current season.

He warned rubber growers against stockpiling, adding that the prices were being artificially inflated in order to offload the stocks at higher tags. Meanwhile, the market buzz expects the prices to touch Rs 110 -120 a kg on the current shortage.

N Radhakrishnan, president, Cochin Rubber Merchants Association (CRMA) said the current rubber stock was higher compared to last year.

As on September 30, the total stock stood at 94,000 tonnes compared with 54,995 tonnes a year ago. He said the artificial shortage could lead to an increase in imports as the global price was lower by Rs 6-7 a kg than India.

The increase in imports coupled with the offloading of stocks may eventually take the prices down, especially during the off season. Rubber imports had increased to 39,495 tonnes in the April-September period from 27,530 tonnes last year.

The Rubber Board has projected a total production of 293,000 tonnes in the October-December period, and expect an overall shortfall of around 45,000 tonnes in 2007-08.