Supply crunch keeps natural rubber price range-bound

A rubber tree and bowl filled with latex (Source: ShutterStock)

A rubber tree and bowl filled with latex (Source: ShutterStock)

Sluggish demand and a supply crunch have kept natural rubber prices range-bound even as copious summer rains allow tapping to continue during lean season in parts of Kerala, the main rubber-producing state in the country.

The price of the RSS-4 rubber variety, used by the tyre industry, has been oscillating between Rs 175 and Rs 170 per kg this month. Big dealers have held back stocks in anticipation of higher prices, triggering a scarcity in the market.

“But they cannot hold for long and may have to release it. Tyre companies are also waiting for them to part with the stock as imports have become costlier with a surge in international prices,’’ said Pius Skaria, former president of Indian Rubber Dealers Federation.

Unlike in the past, the lean season seems to have been limited to March as good summer rains, especially in the chief rubber growing district of Kottayam, have prompted smaller growers to continue tapping. Typically, after February, growers resume tapping towards the end of May when monsoon starts.

“Small growers are tapping in the intervals between the rains encouraged by the good price of RSS-4, though the yield is only 50 percent of the normal yield,’’ said Joshy Joseph, secretary of the Consortium of Indian Rubber Growers Association. Over 80 percent of the growers belong to the small category.

With latex fetching good prices, many growers have been selling rubber as latex to glove makers instead of taking the trouble to make sheets. As the pandemic raised the requirement for medical gloves worldwide, glove imports to India weakened, creating an opportunity for Indian glove manufacturers.

Traders expect demand to rise in coming months

“Several large growers have shifted to latex to overcome labour shortage, high wages and pilferage. But most small growers go for sheets as they can be kept for a longer period,’’ Joseph said. The average centrifugal latex prices hover around Rs 160 per kg.

Traders are expecting demand, particularly from the automobile industry, to escalate in the coming months, if there are no further COVID-19 waves. “This may lift the purchases from the domestic market. At the same time, the tyre industry will go for imports, despite high international prices as local supply is not sufficient to meet the rising demand. This may keep natural rubber prices between Rs 170 and 180 per kg in the short term,’’ said Ketan Joshi, director of Cochin Rubber Merchants Association.

The international price of tyre grade variety is ruling at Rs 179 per kg, Rs 8 higher than the domestic price. However, SMR-20 or block rubber that usually forms the major chunk of imports by the tyre makers is currently selling around Rs 133 per kg. The landed cost of block rubber will be about the same as the local price after paying the duty.

Rubber production close to target figure

Rubber production in FY22 has almost reached the Rubber Board’s projected figure of 7.8 lakh tonnes while the consumption is close to 12.35 lakh tonnes. The production and the consumption were 7.15 lakh tonnes and 10.96 lakh tonnes, respectively, in the previous year. The import has gone past 5 lakh tonnes compared to 4.10 lakh tonnes in FY21, as per the preliminary estimates of the Rubber Board.

International rubber prices are likely to rule higher because of rising crude oil prices as the deepening crisis in Ukraine may prompt western countries to impose more sanctions on Russia. High crude oil prices raise synthetic rubber prices, which, in turn, may increase natural rubber consumption.

The Association of Natural Rubber Producing Countries (ANRPC) said in its report last month that global production is expected to grow by 1.9 percent, at 14.107 million tonnes, while global consumption is expected to see a moderate growth of 1.2 percent to 14.232 million tonnes during 2022.

The report warned that adverse climate and labour shortage in natural rubber- producing countries amidst the rising spread of COVID-19 variants around the globe and off-tapping season may aggravate supply tightness of raw material in the coming months while it saw strong demand from the healthcare sector and auto sales growth in major economies as positives.

According to ANRPC, the surge in crude oil prices, geopolitical crisis, and global supply-chain disruption caused by delayed shipping schedule and shortage of semiconductor chipsets may also affect the NR market.

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