Kochi: Rubber prices are set to firm up in the new year as production falls and demand increases, industry watchers said.

Rubber production in fiscal 2008 is projected to be 819,000 tonnes, down from 853,000 tonnes in the previous year.

With demand for rubber growing, prices have already increased, from about Rs70 a kg to Rs90 a kg. Sajen Peter, chairman of the Rubber Board, a government trade promotion body, said rubber growers could look forward to a good time in 2008.

Heavy rains in Kerala between May and October, along with infectious diseases such as chikungunya, kept rubber tappers away from the plantations for several weeks. This has resulted in a drop in rubber production.

In 2006-07, rubber consumption at 821,000 tonnes was lower than the production in the year, but a rise in consumption has changed the situation this fiscal.

According to estimates of the International Rubber Study Group (IRSG)—a forum of the world rubber industry that keeps a close tab on supply and demand of rubber—global rubber consumption is expected to outgrow supply by calendar year 2009 when production would be around 10.162 million tonnes (mt) and consumption 10.363mt.

During 2008, production is expected to be 10.31mt against 9.8mt in 2007.

Natural rubber exports from India have been on the decline this fiscal. The exports were 21,097 tonnes until 26 December. The corresponding figure last year was 50,655 tonnes. Domestic prices are now ruling higher than the international prices and the differential has slowed down the exports.

Rubber imports, according to the Automative Tyre Manufacturers Association (ATMA) and the All-India Rubber Industries Association (AIRIA), should be more than 90,000 tonnes in 2007-08, 3,000 tonnes more than imports during the last fiscal.

International rubber demand is led by China whose consumption in 2007 is expected to be around 2.6mt. The trade feels that higher Chinese demand in 2008, the year of the Olympics, and the rising crude oil prices should provide strong fundamentals for higher prices in the days ahead.

Suresh Koshi, president of the National Federation of Rubber Producers Societies, which has 750 societies collecting latex (the sap drawn from rubber trees by cutting the bark), said the latex sector is pinning its hopes on the government proposal of using rubberized bitumen for laying roads.

The plan is to mix latex with bitumen on roads to give it a longer life but very little has been done on this front.