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Rubber prices harden on short supply

June 30, 2009 15:05 IST

Natural rubber prices move in sympathy to Crude Oil prices, and the added firmness is due to fall in production in key producing countries.

Natural rubber is cultivated mainly in the seven countries, namely - Thailand, Indonesia, Malaysia, India, Vietnam, China and Sri Lanka.  These countries together accounts for around 93% of the Global Natural Rubber Supply. Natural rubber (NR) production in major producing countries continued to fall, as per data available up to May 2009.

Natural rubber (NR) production in major producing countries continued to fall, as per data available up to May 2009. Production of NR in Thailand, which constitutes 33% of the global supply, declined by 22% during the first four months of CY 09 to 107175 thousand tons.

Output in Malaysia fell 28% in the five months ended May 2009 from a year to earlier to 47333 thousand tons; due to lower rains that slowed tapping activity, low export demand, and an ongoing replanting programme contracting the tappable area by 20,000 hectares in 2009.

Production in Vietnam fell 22% in January-May from a year earlier to 11036 thousand tons, largely due to replanting and the resultant shrinkage in tappable area by 16700 hectares in this year. India's NR output fell annualized 9% in the first five months of CY 09, caused by unusually severe drought in the traditional rubber-growing region of the country. According to forecasts from the Rubber Board of India, pace of output fall is anticipated to moderate to 2.5% for the three months ending August 09.

While NR output fell sharply in all major producing countries, China and Sri Lanka stood exception to this. NR output in China rose annualized 138% or 2.4 times in the five months ended May 2009 to 5367 thousand tons. However, sharp rise in China's output this year largely mirrors the previous year's drastic fall. Sri Lanka's NR output rose by 10% in the five months ended May 2009 to 5160 thousand tons from a year earlier, despite contraction in tapped area by 2000 hectares.

Production

As per latest available CSO statistics, domestic output of natural rubber (NR) and synthetic rubber (SR) decreased 12.14% to 55350 tonnes in February 2009 compared with 62999 tonnes in February 2008 due to adverse weather conditions. Rubber production grew 3.25% in April-February 2008-09 compared with April-February 2007-08. Output of NR declined 11.42% to 48295 tonnes in February 2009 as against 54520 tonnes in February 2008. Production of NR increased 4.90% in April-February 2008-09 compared with a year ago.

Aggregate production during April 2008 to February 2009 was 816,200 tonnes as against 778,095 tonnes during the corresponding period of the previous year, registering a growth of 4.9%. Production of SR decreased 16.79% to 7055 tonnes in February 2009 compared with 8479 tonnes in February 2008. Production of SR decreased 9.95% in April-February 2008-09 compared with a year ago.

Consumption

Total consumption of NR and SR fell 3.24% to 95730 tonnes in February 2009 compared with 98940 tonnes in February 2008. Output grew mere 0.38% in April-February 2008-09 compared with April-February 2007-08. Consumption of NR declined 3.18% to 71520 tonnes in February 2009 as compared to 73870 tonnes in February 2008.

However it move up 1.28% in April-February 2008-09 compared with a year ago. Consumption of SR fell 3.43% to 24210 tonnes in February 2009 compared with 25070 tonnes in February 2008. It moved down 2.23% in April-February 2008-09 compared with April-February 2007-08.

The share of automobile tyre manufacturers in rubber consumption eased to 56.25% (56.36% of NR and 55.93% of SR) in February 2009 compared with February 2008.  Similarly, their share in the rubber consumption fell to 58.15% (56.79% NR and 62.24% SR) in April-February 2009 compared with the same period a year ago.

The rubber consumption increased by 1.3% to 618742 tons in April 2008 to February 2009, during which period, auto tyre-manufacturing sector actually recorded 1.3% fall.  Interestingly, while the auto sector recorded 0.2% rise in natural rubber consumption to 452882 tons; their synthetic rubber consumption tumbled down by 5.3% to 165859 tons during this period.

Faded performance of Harrisons Malayalam

The RPG Group member – Harrisons Malayalam has reported Net Loss of Rs 8.99 crore for the quarter ended March 09 on the back of marginal decline in the income from operations by 1% to Rs 59.93 crore – due to dip in the revenues from Rubber segment by 12% to Rs 31.16 crore. At the segment level, the company has reported faded results with all its segments (tea, rubber and other segments) reporting losses. The company's major rubber segment has reported loss of Rs 1.13 crore as against profit of Rs 6.68 crore in the corresponding previous year. Thus the company has reported losses at the operating level.

Imports

Imports of NR decreased 44.4% to 2635 tonnes in February 2009 compared with 4738 tonnes in February 2008. Imports declined 9.7% in April-February 2008-09 compared with April-February 2007-08. Imports of SR decreased 41.3% to 9765 tonnes in February 2009 compared with 16625 tonnes in February 2008 and increased 1% in April-February 2008-09 compared with April-February 2007-08. Total rubber imports fell 42% in February 2009 compared with February 2008.Imports decreased 3.8% in April-February 2008-09 compared with April-February 2007-08.

Exports

Exports of NR registered a fall 84.59% to 2257 tonnes in February 2009 compared with 14643 tonnes in February 2007. Exports drop 4.89% in April- February 2008-09 compared with April- February 2007-08. Unscientific exploitation practices among small growers are a matter of concern, as it leads to low productivity, high incidence of Tapping Panel Dryness and premature re plantation.

There is an urgent need for popularizing scientific tapping practices among small growers for the sustainable growth of the rubber plantation industry. Adoption of low frequency tapping has an important role in improving the conditions of the mature holdings and extending the productive life of the plantations. It can also be considered as a viable solution for the problem of the shortage of skilled tappers.

Prices rebound as production ease while consumption improves

RSS 4 rubber prices have flared up from Rs 5900 per quintal on 8th December 2008 to Rs 10300 on 2nd May 2009, and are currently hovering around Rs 9950 per quintal on 20th June 2009.  Infact, year 2009 has so far been eventual for the rubber producers. Despite such impressive sequential surge, the rubber fell 13.42% in April 2009 as against the 21.86% increase in April 2008.

Further it registered a decline of 19.92%, as on 26 may 2009 compared with the 40.94% surge in May 2008. As per data available to the latest 18 June 09, average prices in the month of June 09 have marginally improved by 1% but still lower by 22% to Rs 9895 per quintal. Apart from the encouraging signs of economic activity, the NR prices have also benefited from strengthening crude petroleum oil prices.

However, NR prices couldn't gain much inline with crude oil prices which surged from  USD 52.85 a barrel on 1 May 09 to USD 67.97 a barrel on 1 June 09. On an average, crude oil prices were down by 48% to USD 69.39 per barrel in the month of June 09, 18% higher on sequential basis.

Outlook

The rebound in rubber prices has come as welcome breather for the rubber producers.  Also, the rising crude oil prices will increase the cost of synthetic rubber, which adds cushion to the natural rubber prices. Further, the stable replacement demand, and improving OEM demand for tyres coupled with the recent fall in production of rubber together have strengthened the rubber sector and steered rubber prices from recent lows in January 2009.

Prices of Natural Rubber - RSS 4 Kottayam

 

Top of Form

A-2008 - 09

Bottom of Form

A-2007 - 08

% Chg.

Jul

13,361.46

7,943.27

68

Aug

13,782.29

8,741.67

58

Sep

13,536.00

8,856.00

53

Oct

9,074.04

9,423.96

-4

Nov

7,681.00

9,603.00

-20

Dec

6,488.46

9,221.00

-30

Jan

7,034.38

9,431.73

-25

Feb

6,909.78

9,686.96

-29

Mar

7,562.50

10,354.00

-27

Apr

9,487.50

10,958.33

-13

May

9,803.41

12,248.08

-20

Jun

9,895.00

12,708.33

-22

YTD. Jul - Jun

9,551.32

9,931.36

-4

Price: Rs per Quintal

Source: Capitaline database

Production of Natural Rubber

 

Jan-May 09

Var %

Malaysia

47333

-28

India

32156

-9

Vietnam

11036

-22

China

5367

138

Sri Lanka

5160

10

*Thailand

107175

-22

* period from Jan - April 09

Units in Thousand Tons; Source: ANRPC

Crude Oil Brent

 

Top of Form

2008 - 09

Bottom of Form

2007 - 08

% Chg.

Jul

134.57

75.81

78

Aug

115.26

71.27

62

Sep

100.79

76.96

31

Oct

73.68

82.45

-11

Nov

54.75

92.10

-41

Dec

43.05

91.44

-53

Jan

45.77

92.22

-50

Feb

43.90

94.76

-54

Mar

47.42

102.86

-54

Apr

51.39

110.43

-53

May

58.61

124.32

-53

Jun

69.39

133.74

-48

YTD. Jul - Jun

69.88

95.70

-27

Price: Rs per Quintal

Source: Capitaline database

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