Rubber prices to fall further on poor demand from tyre sector and falling overseas market

Rubber price is coming under pressure both in the domestic and international markets. On the National Commodity and Derivatives Exchanges (NCDEX ) rubber declined 17.5% to Rs 12,380 per quintal on September 9 against Rs 15,010 per quintal on May 26.

According to market experts, poor demand from the tyre sector , which consumes over 50% of the natural rubber production in the country and bear trend in the overseas market put pressure on prices despite disruptions in tapping owing to heavy South-West monsoon rains in the major rubber growing areas in Kerala. 

 
In the international market, rubber prices declined 26% during April 1 and September 9 in Bangkok markets, according to Rubber Board of India.

Anu V Pai, research analyst, Geojit Comtrade, says, "Despite rise in natural rubber consumption, off-take by the tyre sector from the local market has stayed subdued for long as the industry relied heavily on imports to meet demand."

Tarun Satsangi, AVP, commodity and currency research, Globe Commodities, says, "Because of bumper production in China and availability of sufficient rubber stock, the country is importing less rubber from India. Lower demand from the tyre industry is adding to the pressure.

According to the Rubber Board, India's April-July natural rubber imports this year were 1,33,789 tonnes compared to 90,580 tonnes imported during the same period last year.  

In the top natural rubber producing country Thailand, rubber prices are hovering near its lowest level in five years. From Rs 15,548 a quintal in January 2 it has slipped to Rs 10,282 on September 9 in the Bangkok market. "Moves by Thailand to offload stockpiles raised worries of oversupply that depressed prices further," says Pai of Geojit.

Thailand's National Council for Peace and Order approved selling of 2,10,000 metric tonnes of rubber from the state stockpiles and were in discussion with the potential buyers to ink the deal.

For the further movement of rubber in India, Pai says, "Looking ahead, the outlook for rubber is likely to stay weak. Amidst burgeoning imports and subdued  demand, with Southwest monsoons subsiding tapping is likely to pick up in the major rubber growing areas in Kerala and likely to be active now after Onam, Kerala's national festival. 

However, with prices languishing near multi-year lows it is to be seen whether  growers will raise the production."

"By the end of December 2014, we can see further fall in rubber prices by Rs 2,500 per quintal," says Satsangi of Globe Commodities.