Natural rubber declines on muted demand and low global prices
Plummeting global prices and muted demand from tyre makers are driving down the price of natural rubber in India.
The price of RSS-4 variety, used for making tyres, has dropped 7 per cent in a month to Rs 140 per kg. Its equivalent in the global market has become nearly 12 per cent cheaper at Rs 107.78 per kg over the same period.
Experts say domestic prices could fall further in the coming weeks. The September contract for delivery at Indian Commodity Exchange (ICX) hovered around Rs 135 per kg on Monday.
“There is downward pressure on the price,” said Anu Pai, research analyst, Geojit Commodities.
According to Pai, the US-China trade war and declining crude oil prices have affected global prices of rubber.
“Besides, the peak season is about to begin in Thailand, the largest producer, which again could affect the prices,” she said.
Adding to the woes of rubber growers was heavy August rainfall in northern parts of Kerala which caused leaves of rubber trees to fall off.
“The trees in the estates in northern Kerala have shed leaves after the torrential rain, affecting the yield. We have also noticed fungal problems in the trees in the Kottayam belt,” said Santhosh Kumar, senior vice-president, Harrisons Malayalam.
“Overall, there could be 20-25 per cent drop in production during the month.”
As per data from Rubber Board, rubber production in the country was marginally down in the quarter ended June from a year ago to 123,000 tonnes.
Consumption, too, has declined by 4 per cent to 293,000 tonnes.
“Demand from the tyre industry is subdued as automobile sales are down, with factories shutting down. But demand may improve in the coming months,” said Tomy Abraham, president, Indian Rubber Dealers Federation.
With the international prices way below the Indian rates, tyre companies have already contracted for imports.
Block rubber, which is imported mostly by tyre makers, costs about Rs 100 per kg.
With duty of 25 per cent, the landed cost is still less than the domestic variety. Last year saw a record import of 582,351tonnes of rubber. In the first few months of the year, global rubber prices were high, which led to lower imports.
“With state incentive scheme promising Rs 150 per kg for the growers in Kerala, production may pick up in the coming months despite plunging prices,” said Abraham.