With the start of the tapping season, rubber prices are expected to ease for the next couple of months. But if international prices remain firm, there are slim chances of any significant correction.
Rubber prices have been trading above Rs 100 per kg for more than a year now. In October 2016, prices were hovering around Rs 116-114 per kg at National Multi Commodity Exchange. Prices started moving up by December and touched a recent high of Rs 165.53 per kg as on January 30 as the international prices became firm and moved up higher than Indian prices. Positive data coming out from the automotive sector in China have been lending support to rubber prices.
Meanwhile, there was a spurt in crude oil prices. Reports about shortage in production in major rubber producing countries like Thailand too helped the rally in rubber prices. But prices cooled in the coming months and fell back to Rs 118 per kg by June. After the monsoon rains in rubber producing areas of Kerala halted tapping, prices started recovering once again and are now trading around Rs 135 per kg.
As the prices were trading above Rs 100 per kg during the past several months, production has been generally on the higher side. Between April and July this year, production was up 7.5 per cent to 201,000 tonnes. Still there was a production deficit of 150,000 tonnes against the consumption of 351,000 tonnes. Imports, which had dried up when international prices went up above Indian prices, resumed after the situation was reversed.
“Now that rains are over, the market expects increase in tapping activities in the coming months. The production will be cyclically up for the next few months,” said Hareesh V, head, commodity research, Geofin Comtrade.
Higher production will put pressure on the rubber prices, considering the fact that consumption has been growing only marginally. Imports are now viable as Indian rubber is trading Rs 26 higher than international rubber.
Currently, the Bangkok prices are moving around Rs 113 per kg, falling from Rs 190 per kg in February. However, the production scenario in the international market lends hope on the likelihood of prices going up in the coming months.
Production is expected to be lower in Thailand and Malaysia due to subdued rubber prices and change in weather pattern. Unusually heavy rains have affected rubber production in northern Thailand.
The world market is also facing a production deficit of 504,000 tonnes. Global natural rubber production was estimated to be 8.04 million tonnes between January and August this year against consumption of 8.54 million tonnes, according to a release from the Association of Natural Rubber Producing Countries.
As the prices have once again fallen to earlier levels, International Tripartite Rubber Council (ITRC), representing the world’s top natural rubber producers, is considering curb of exports as an option before to lift prices. ITRC maintains that the current natural rubber price is not reflective of the economic fundamentals.
“In the domestic market there is no indicator as to expect a rally or selloff. Prices may see some correction due to the seasonal change in production. Prices may move within a range of Rs 125-140 per kg or can even fall back to Rs 120 per kg,” said Hareesh. However, if international prices remain firm, domestic prices may remain stable.